Commercial Interest-Only Expiry: Refinance or Stay With Your Lender?
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Commercial Property · Interest Only · Refinance
Interest-only expiry is a date you can plan around. The first job is to check whether only the repayment type changes on that date, or whether the whole commercial facility also matures and must be renewed, refinanced or repaid.
Quick Answer
If the interest-only period ends before the commercial loan itself matures, the facility will usually move to principal-and-interest repayments for the remaining term unless your lender approves a variation. If the interest-only date is also the facility maturity date, the balance may instead need to be renewed, refinanced or repaid.
For a performing facility, there are three structural outcomes: let the contract reset, stay with the current lender and vary the loan, or refinance to another lender. Repricing the rate is a tactic inside the second path, not a separate fourth outcome.
This guide is for a commercial property loan that is performing normally and approaching a scheduled interest-only expiry. If you have a default, covenant-breach or non-renewal notice, use the commercial loan covenant and non-renewal guide, because the deadlines and options are different.
Most borrowers start by asking whether they should refinance. The better sequence is to identify the date problem first, then the credit problem, then the price problem. Check the interest-only expiry and facility maturity dates, ask what your current lender will approve, test whether the loan still works at today's valuation and serviceability, and only then compare the cost of switching. This guide follows that decision in the order it actually happens.
Also called: interest-only rollover, IO expiry, commercial loan rollover.
What happens to your repayments when a commercial interest-only term ends?
If the interest-only period ends before the commercial facility matures, the loan will usually switch to principal and interest over the remaining term unless your lender approves a variation. If the interest-only expiry and facility maturity fall on the same date, the balance may instead become due for renewal, refinance or repayment, so check both dates before assuming the next payment is simply a higher P&I amount.
Where the facility continues, two things drive the size of the repayment jump: the full principal is still outstanding, and it now has to be repaid across fewer remaining years.
- Payment increase: every repayment now has to cover principal as well as interest. Interest-only repayments were never reducing the balance, so the full loan amount is still sitting there on the day the term ends.
- Shorter remaining term: the principal has to be repaid across the years that are left, not across the original loan term. An interest-only run that ate a meaningful share of the term compresses the repayment schedule into what remains, which is why two loans of the same size can convert to very different repayments.
What should you check before you call the lender?
Pull the facility schedule and the latest statement before you ask for anything. Five details decide which conversation you are actually having:
- Interest-only expiry date: the date the repayment type is due to change.
- Facility maturity date: the date the loan itself ends or must be renewed. It may be different from the interest-only expiry.
- Current balance and repayment: the number that will be tested against a new repayment or refinance.
- Fixed-rate or pricing expiry: a fixed-rate end date can create a separate repricing or break-cost question.
- Security and guarantees: check which properties, guarantees and other facilities sit behind the loan, because cross-security can turn a one-loan refinance into a wider restructure.
What if your fixed rate ends after the interest-only period?
Treat the fixed-rate end date and the interest-only end date as two separate clocks. If interest-only ends first, the existing facility may move to principal and interest while the fixed rate is still running. Refinancing before the fixed period ends can also trigger a break cost or early-repayment adjustment under the outgoing facility, so the cheapest-looking rate can still be the more expensive move.
Ask the incumbent for three numbers before deciding: the repayment if the loan simply resets, the terms available if it varies or extends the facility, and the payout or break cost if you leave on the proposed settlement date. Then compare those against the new lender's total switching cost and break-even period. Waiting purely to avoid a break cost can make sense in some cases, but not if it leaves too little time to value, approve, discharge and settle before a maturity or repayment deadline. The current market-rate context is covered in the commercial property loan rates guide.
If your facility was structured with a residual or balloon amount at the end, the conversion is not the only date that matters, and the two are often confused. The guide on what to do when a balloon payment is due and you are not ready covers that separate problem. Where interest has been added to the balance rather than paid along the way, see capitalised interest, because the amount converting to principal and interest may be larger than the amount you originally drew.
It is worth being precise about what this event is not. Under APRA's prudential standard on credit risk management, an exposure is restructured only where the borrower is experiencing financial difficulty or hardship and the lender grants a concession it would not otherwise consider. Those two conditions are set out at paragraph 13(c) of APS 220, in force from 1 January 2023. A performing borrower rolling over at a scheduled expiry does not meet that definition. This matters because the language around it is often borrowed from distress, and a scheduled expiry on a loan that is paid up to date is a planning event, not a workout.
| Your choice | What happens to the repayment | What the lender reassesses | What it costs you |
|---|---|---|---|
| Let the contract reset | Usually moves to principal and interest if the facility continues beyond the interest-only date | Usually nothing if this change is already written into the existing contract | Usually no switching fee, but the scheduled repayment can rise materially because principal starts amortising |
| Ask to extend interest-only | Stays interest-only for the new period, if granted | Serviceability, current financials, the property and the exit at the end of the extended term | Usually a variation fee, and typically a new valuation, both varying by lender |
| Stay and renegotiate the rate | Still converts, unless you also ask for an extension, but converts at a lower rate | Usually only your conduct and the pricing, not the whole facility | Typically nothing beyond your own time, which is why it is the first call to make |
| Refinance to a new lender | Set by a new facility, which can have a new term, repayment type, rate, covenants and security structure | A full new credit assessment, including serviceability, valuation, conduct, property and security | Discharge and registration costs, electronic lodgement fees, valuation, establishment and legal costs, plus any fixed-rate break cost |
Basis: general structure of Australian commercial property facilities, described qualitatively. Fees and timeframes vary by lender and are indicative only. As at 20 August 2026.
Should you refinance, or ask your current lender to extend?
Ask your current lender first, then price refinancing against the exact answer they give you. The useful comparison is not simply “stay or switch”; it is the incumbent's actual variation offer against the new lender's actual facility after fees, valuation and credit conditions.
| What you are comparing | Staying with your current lender | Refinancing to a new lender |
|---|---|---|
| What changes | The rate, the interest-only period, or both. The facility, the security and the account numbers stay where they are | Everything. New contract, new lender, new security registration, new covenants and a new review cycle |
| Who assesses it | Your existing lender, working from a file it already holds and conduct it has already seen | A credit team with no history with you, forming a view from documents alone |
| What you have to provide | Usually recent financials and the lease position. A pricing request alone may need very little | A full pack: financials, tax position, leases, rent roll, structure and identification |
| Typical elapsed time | Typically the shorter path, because there is no discharge and no settlement to book, though it varies by lender | Typically longer, because assessment, valuation, documents, discharge and settlement all have to line up |
| Costs you pay | Usually a variation fee where the term or structure changes, and often nothing at all for a pricing review | Registry discharge and registration, electronic lodgement, valuation, establishment and legal costs |
| Effect on your other facilities | Usually none. Cross-secured facilities and set-off arrangements stay as they are | Can be substantial where facilities are cross-secured, since untangling one loan can require moving several |
| What happens if the answer is no | Your loan continues on its existing terms and converts as contracted. Nothing is withdrawn because you asked | You have spent time and possibly a valuation fee, and a credit enquiry is recorded whichever way it lands |
| Whether a new valuation is triggered | Often not for pricing alone. Usually yes where you are asking to extend the interest-only term | Effectively always, because the incoming lender is taking new security and needs its own number |
Basis: practice across Australian bank and non-bank commercial property lenders, described qualitatively. Indicative only, individual lender policy varies and applies at the time of application. As at 20 August 2026.
The reason the incumbent path is worth exhausting first is that the two decisions are made by different people against different questions. Your own lender is deciding whether to keep an account it already understands. A new lender is deciding whether to take on a borrower it has never met, and the law gives it a lot of room in how it does that, because as ASIC puts it, the law provides the lowest level of protection to commercial loans, including loans to small businesses. That is not a reason to avoid switching. It is a reason to know what you are signing before you move. The clause that most often makes a move harder than expected is an all monies mortgage, which secures everything you owe that lender rather than the single facility you are trying to move, and the request that answers it is a partial discharge, sometimes called a security release or a substitution of security, where one property comes off the arrangement and the rest stays. The outgoing lender may also want the remaining security revalued or require a repayment or release amount before it agrees to let one property go, because it is assessing what debt and security remain after the release rather than only the property you are refinancing. Ask your lender which of those applies to you before you price anything, because the answer changes how many facilities have to move together and how much cash may be needed at settlement.
An owner-occupier holds a commercial property facility with roughly a year of interest-only left. The plan is to refinance, because a competitor is advertising better pricing. Before starting, the borrower asks the incumbent for a pricing review and puts the competing offer in writing.
The incumbent comes back with part of the gap closed and no fee. Switching would still have delivered a slightly better rate, but only after paying discharge and registration costs, electronic lodgement fees and a valuation, and only after the whole file was reassessed from scratch. The borrower stays, and revisits it at the next annual review with the same evidence pack already built. Where the loan needs to move for a reason other than price, the timing sequence is covered in the refinance timing note for interest-only expiry.
What if your current lender says no?
First find out what the lender has actually said no to, because each answer sends you down a different path.
- No to a lower rate: the facility can still be perfectly workable. Compare the existing terms against a fully costed refinance rather than treating the pricing refusal as a credit decline.
- No to extending interest-only, but yes to continuing on P&I: this is primarily a cash-flow and serviceability decision. Model the new repayment, then test whether another lender would offer a structure that fits better.
- No because of financials, serviceability or documentation: identify the exact missing test. Depending on the property and borrower, alt-doc or lease-doc commercial lending may use a different evidence path, but they are not no-doc loans and lender policy still applies.
- No to renewing the facility at maturity: treat the maturity date as a hard project deadline. If there is also a covenant breach, default or non-renewal notice, move to the covenant and non-renewal guide rather than treating it as a normal rate-shopping exercise.
There is also a separate path where the purpose is not simply to preserve interest-only or lower the rate. If you are pulling equity out of the property, that is an equity release refinance with a different assessment. If a bank path no longer fits, the non-bank commercial property path and private lending are separate structures with their own costs and exit requirements.
Will your lender extend the interest-only period, and what do they assess?
A lender will extend the interest-only period where it can satisfy itself that the loan still services, the security still supports it, and there is a credible way the principal eventually gets repaid. An extension is an underwriting decision, not an administrative one, and it is assessed against your current position rather than the position you were in when the facility was written.
On commercial property the assessment usually runs through the same handful of tests. Income coverage is measured through ratios such as debt service coverage ratio and interest coverage ratio, and where the property is leased, the lease itself does much of the work, which is the logic behind lease-doc commercial lending. Where financials are not current, an alt-doc refinance may be the fallback, though it is usually priced accordingly. Gearing is the other half of the question, and the position at 80 per cent loan to value on a commercial property loan is where policy tends to tighten.
What if the tenant's lease expires around the same time as interest-only?
A short remaining lease can turn an otherwise routine extension or refinance into a lease-risk question. The lender is no longer looking only at today's rent; it is also asking whether that income is likely to remain available through the proposed loan term and what the property is worth if the tenant leaves. That can affect the valuation, the loan term, the amount a lender is prepared to advance and whether an interest-only extension still fits policy.
Do not assume an unexercised tenant option is the same as a renewed lease. If the tenant intends to stay, get the renewal or option evidence moving early and give the lender the executed lease documents as soon as they exist. If renewal is uncertain, prepare the alternative case as well: current market rent, leasing evidence, vacancy assumptions and the amount of debt the property can still support if the valuation or lender appetite changes. The lease-doc commercial lending guide covers the income-evidence path in more detail.
What documents should you have ready for an interest-only extension?
Prepare the file before you ask. A commercial lender commonly wants enough information to re-test income, security and the exit, so the useful pack is current rather than historic:
- the facility schedule showing both the interest-only expiry and loan maturity dates;
- recent loan statements showing conduct and the current balance;
- current business financials and tax information where the lender relies on full-doc servicing;
- the current lease, rent roll or tenancy schedule where property income supports the debt;
- property details and any recent valuation you already hold; and
- a short explanation of why you want more interest-only time and how the principal is ultimately expected to reduce, refinance or be repaid.
If full financials are not ready, do not assume the only alternatives are “wait” or “private loan”. Some commercial structures can assess income through other evidence, including lease income or alternative documentation, depending on the borrower, property and lender. The trade-off can be different LVRs, pricing and evidence requirements, so compare the structure rather than the label.
What tends to support an extension
- Repayments and facility conduct clean through the current term
- Financials that are current, not two years old
- Leases with term left on them, or an owner-occupier trading business that covers the debt
- Gearing that has improved, or at least not moved against you
- A stated reason for the extension that ends somewhere, such as a sale, a lease renewal or a capital works program
- The request made with time left on the clock rather than in the final weeks
What tends to get it cut back or declined
- No current financials, or figures that do not reconcile to the tax position
- A vacant or short-dated tenancy with no replacement in sight
- Gearing that has drifted up because the balance never reduced
- An interest-only run that has already been extended once with nothing having changed
- No answer to the question of how the principal ever gets repaid
- The request arriving after the expiry date has passed
Where an extension is granted, it is commonly shorter than the one requested, and it commonly comes with something attached, such as a reduced facility limit, a principal component, or a condition tied to the lease. That is a normal commercial outcome rather than a bad one, and it is worth deciding in advance which of those you would accept.
How do you ask your lender for a better rate, and what works?
You ask in writing, you ask the right desk, and you bring evidence that a competitor would take the loan. A rate review is a commercial negotiation that lenders run constantly, and it is priced against the cost of losing your account, not against how politely you ask.
This is more common than most borrowers assume. The Reserve Bank reported in its October 2025 Bulletin on small business economic and financial conditions that lenders have reported more frequent negotiation by customers on small business loan rates in recent years, and in the same section that the spread between SME and large business lending rates has narrowed to a historically low level. Source: RBA Bulletin, October 2025, section titled Borrowing costs. As-of October 2025. Qualifier: this describes market conditions across small business lending generally and says nothing about what any individual borrower will be offered.
The practical version is short. Put the request in writing so it is on the file. Name the facility and the expiry date. State what you are asking for, whether that is a rate, an interest-only extension, or both. Attach the evidence: current financials, the lease position, and a competing indication if you have one. Then ask for a written answer by a date, because an undated request sits in a queue. If you want to see where market pricing actually sits before you start, use the note on commercial property loan rates in Australia, then compare each offer on the same basis: interest rate, establishment and ongoing fees, term, repayment type, security, covenants and exit costs. Do not assume a consumer-style comparison rate will be supplied on business-purpose commercial credit; ASIC's comparison-rate rules apply to fixed-term credit that is for, or mainly for, personal, domestic or household purposes.
From our broking, indicative
A rate review request looks nothing like a loan application, and the borrowers who get the best outcomes treat it as a commercial file note rather than a favour. Here is where this commonly lands from our seat, described qualitatively.
- What moves a decision: current financials, a lease with term left, a clean conduct history, and a competing written indication that is genuinely deliverable rather than a screenshot of an advertised rate.
- What does not move a decision: how long you have banked with them, a general complaint that the rate feels high, or a threat to leave that is not backed by anything a credit team can read.
- What gets countered rather than declined: a request that is specific, evidenced and asks for something the lender can approve inside its existing policy.
- What gets declined outright: a request made after the expiry date, a request with no current financials attached, or a request to extend interest-only with no stated end point for the principal.
- Where the timing lands: requests made with real time before expiry are handled as pricing decisions. Requests made close to the date are handled as urgent exceptions, and where this commonly lands is with less room to negotiate rather than more.
Indicative only, drawn from commercial property facilities we have placed and repriced for self-employed clients, as at 20 August 2026. Not a quote, not an offer, and not a statement of what any lender will approve. Actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
If you want the evidence pack built and the request framed before you make the call, check your eligibility and we will tell you whether the ask is worth making as it stands.
What does it cost to refinance a commercial property loan?
Refinancing a commercial property loan costs you a set of government registry fees to release the old mortgage and register the new one, an electronic lodgement fee on each of those dealings, plus whatever your incoming lender charges for valuation, establishment and legal work. The government half is knowable to the cent before you start, and it is set out state by state below.
| State or territory | Registry discharge fee 2026-27 | Registry mortgage registration fee 2026-27 | Electronic lodgement fee | Source |
|---|---|---|---|---|
| NSW | $166.60 excluding GST, $182.73 including GST | $166.60 excluding GST, $182.73 including GST | Discharge $26.29, registration $54.89, GST inclusive | NSW Land Registry Services fee schedule, 2026-27. Includes a $5.35 Torrens Assurance Fund levy |
| VIC | $129.20 electronic, $139.50 paper | $129.20 electronic, $139.50 paper | Discharge $27.39, registration $55.99, GST inclusive | Land Services Victoria 2026-27 live fee catalogue, National Mortgage and Discharge of Mortgage |
| QLD | $248.04 | $248.04 | Discharge $27.39, registration $55.99, GST inclusive | Titles Queensland FY2026-27 schedule, item 2(l), any other instrument |
| WA | $225.10 per mortgage | $225.10, plus $17.60 for each additional dealing | Discharge $27.39, registration $55.99, GST inclusive | Landgate fee schedule, 2026-27. Landgate states all fees are not subject to GST |
| SA | $204.00 | $204.00 | Discharge $27.39, registration $55.99, GST inclusive | Land Services SA fee schedule, 2026-27. Includes a $15.00 transaction fee, one fee covers up to 20 titles |
| TAS | $207.76 | $167.58 | Discharge $27.39, registration $55.99, GST inclusive | Tasmanian Land Titles Office fee schedule, from 1 July 2026 |
| NT | $181, Form 42 | $181, Form 39 | Discharge $27.39, registration $55.99, GST inclusive | NT Land Titles Office. The page is silent on GST and on the financial year |
| ACT | $184.00 | $184.00 | Discharge $27.39, registration $55.99, GST inclusive | Access Canberra land title fees, stated current as at 1 July 2026 |
Basis, scope and qualifier, read with the table: registry figures are the published state and territory land registry fees for 2026-27, read at build on 20 August 2026. Electronic lodgement fees are the PEXA FY2026-27 jurisdiction prices for the jurisdiction named in that row, GST inclusive. NSW differs from the other jurisdictions, so there is no single national figure. Electronic lodgement fees stack on top of the registry fee, they do not replace it. A refinance pays a registry discharge, a registry registration, an electronic lodgement fee on the discharge and another on the registration. PEXA's current FY2026-27 standard single-title document prices took effect on 1 July 2026 and superseded the earlier 18 May 2026 prices; registry and PEXA fee schedules can change independently, so check both before settlement. Every figure is high churn and is indicative of the published schedule at the date shown, not a quote. Victoria's mortgage and discharge figures were re-read directly from the Land Services Victoria live fee catalogue on 20 August 2026.
What if the new lender's valuation comes in lower than expected?
A lower commercial valuation can change the refinance even when nothing else in the file has moved, because the new lender calculates its LVR from the value it accepts. The practical responses are to check the valuer's property facts and lease assumptions, provide relevant evidence if something material is wrong or missing, reduce the loan request, add equity or acceptable security, or test a lender whose policy fits the resulting LVR. Ordering valuation after valuation without new evidence can waste the time you were trying to protect.
If the 2025 Banking Code applies to you as a Small Business and you paid for the commercial property valuation, paragraph 97 says the bank will provide you with a copy of the valuation and the related valuer instruction, except where Enforcement Proceedings have commenced. That can be useful when the number changes the deal because you can see what the valuer was asked to assess and what assumptions sit behind the result. Source: 2025 Banking Code of Practice, paragraphs 95 to 98, read 20 August 2026. Qualifier: this is a Code commitment for covered customers of subscribing banks, not a universal statutory right against every lender.
What happens after you decide to refinance?
A commercial refinance normally moves through six linked steps: the incoming lender completes its credit assessment, the property is valued, formal approval and loan documents are issued, the outgoing lender receives a discharge or security-release authority, a final payout figure is calculated for settlement, and settlement releases the old security while the new lender takes its agreed security. The sequence varies by lender, but skipping the discharge step is not an option just because the new loan has been approved.
The payout figure is also worth separating from the balance shown on a statement. Depending on the facility, the amount required at settlement can include interest accrued to the settlement date, lender discharge or legal charges and any applicable fixed-rate break cost. Cross-secured facilities can add another decision before settlement because the outgoing lender may need to agree to a partial discharge, substitution of security or release of a guarantor rather than simply closing one standalone loan. That is why the refinance is not finished at credit approval. For the detailed sequence and lead times, use the commercial refinance timing note for interest-only expiry.
What these figures do not cover
The registry and lodgement fees are the floor, not the bill. On top of them sit the incoming lender's valuation, its establishment or application fee, legal or settlement agent costs, and, if your existing facility is fixed, any break cost the outgoing lender calculates at the time. There may also be a title production or custody fee where the outgoing lender holds paper titles. Lender discharge teams also work to their own published processing windows, and that step is the one most likely to stretch a settlement date, so it belongs in your timeline rather than in your budget. If you want the structural basics before pricing the move, start with how commercial property loans work, and note that every lender you approach for a quote will record a credit enquiry, which is a reason to shortlist rather than shop everywhere.
At what rate difference is switching worth it?
There is no universal rate difference that makes switching worthwhile, and the two per cent rule that circulates online is a United States home loan heuristic that does not survive contact with an Australian commercial facility. The honest test is arithmetic: divide what the move costs you by what it saves you in a year, and see how many months it takes to get your money back.
Break-even months = total refinance costs ÷ monthly interest saving.
For an interest-only facility, the monthly interest saving can be estimated as loan balance × annual rate reduction ÷ 12. Use the actual rate offered and the actual fees you expect to pay. If the refinance also changes the repayment type, keep the principal component separate: principal repayment affects cash flow, but it is not itself an interest saving.
Run the test in that order. Add the registry and lodgement fees for your state from the table above, then the incoming lender's valuation, establishment and legal costs, and any break cost on a fixed facility. That total is the numerator. The denominator is the annual saving, which on an interest-only facility is the rate gap applied to the whole balance, because nothing is being paid down. Divide, and you have your break-even in years. If the answer is comfortably inside the time you expect to hold the property and the facility, switching pays. If it is not, the incumbent conversation is the better use of the same effort.
Two things distort this calculation more often than the rate does. The first is the repayment change itself: moving from interest-only to principal and interest raises what leaves your account whether you switch or stay, and that is a cashflow question, not a savings question. Do not credit a refinance with a benefit it is not delivering. The second is serviceability, because a facility you cannot service on the new lender's assessment is not an option at any price, however attractive the headline number looks. Current market pricing is the other input, and the note on commercial property loan rates in Australia is the place to calibrate what a realistic gap looks like before you build the sum.
The point of asking the incumbent first is not that a discount is guaranteed. It is that the Reserve Bank has recorded more frequent negotiation by customers on small business loan rates, so a pricing discussion is a normal part of the market. Get the incumbent's written offer, then compare it with the refinance on total cost and structure rather than assuming the advertised rate is the final answer.
One framing to discard entirely. Any advice built on the idea that rates are about to fall and you should therefore wait is not a plan, it is a prediction, and your interest-only term expires on its own date regardless. Work from the contract date in front of you.
An investor with a Queensland commercial property is quoted a lower rate by a competing lender. Before accepting, they add up the government portion first: a registry release of mortgage and a registry mortgage registration at the Titles Queensland 2026-27 rate, plus an electronic lodgement fee on each dealing. Then they add the incoming lender's valuation, establishment and legal costs, which are the larger numbers.
With the total in hand, they divide it by the annual saving the rate gap produces on the current balance. The break-even lands far enough out that they take the number back to the incumbent first. That is the same order of operations set out in the equity release refinance guide, where the cost of moving has to be justified by what the move actually achieves.
What is an annual review, and how is it different from interest-only expiry?
An annual review is your lender's scheduled re-look at a commercial facility that is running normally, and it is a different event from interest-only expiry with a different trigger and a different consequence. Expiry is written into your loan contract and changes your repayment. A review is written into the lender's own credit process and usually changes nothing you can see.
The confusion is understandable, because both involve handing over financials. At a review, a commercial lender typically asks for current financial statements, tax returns, an updated rent roll or lease schedule, and sometimes a fresh valuation, then re-tests the facility against its loan covenants. Most reviews conclude with the facility continuing on its existing terms. Some conclude with a condition being added, a limit being trimmed, or pricing being adjusted. Almost none of them change your repayment on their own, which is the practical difference: a review can change the terms around your loan, while expiry changes the amount you pay.
For the borrower, the useful question is not why the bank runs the review internally; it is what the review can change. If the updated financials, lease position and gearing still fit policy, the facility commonly continues. If one of those has moved, the lender may change pricing, add a condition, reduce a limit, request more information or ask for a new valuation. That is why the annual review can also be a sensible time to ask for a repricing rather than waiting for interest-only expiry.
Keep the distinction clean: an annual review is a scheduled credit check, interest-only expiry is a repayment event, and facility maturity is the date the loan itself ends or must be renewed. If an annual review turns into a covenant breach, default or non-renewal problem, use the commercial loan covenant breach guide, because that is no longer the performing-expiry scenario this page is designed for.
What notice must a lender give before your facility ends?
There is no universal three-month notice rule for every Australian commercial loan. Under paragraph 93 of the 2025 Banking Code of Practice, a subscribing bank commits to at least three months' notice of a decision not to extend a covered Small Business loan where the borrower is not in Default and the principal is not due to be fully repaid by regular periodic repayments at the scheduled end of the loan.
The conditions matter. The 2025 Banking Code defines a Small Business using a group-level test: annual turnover of less than $10 million in the previous financial year, fewer than 100 full-time equivalent employees, and less than $5 million total debt to all credit providers, subject to the Code's exclusions and detailed Business Group rules. Paragraph 93 sits in the Small Business lending part of the Code and binds subscribing banks, not every commercial lender. Paragraph 94 also matters after the notice question is answered: if the bank decides to extend or refinance the loan, the Code does not require it to do so on the same terms. Source: 2025 Banking Code of Practice, Small Business definition and paragraphs 93 to 94, read 20 August 2026. Qualifier: the Code is an industry commitment and coverage depends on the borrower, banking service and lender.
Take three months as the planning floor rather than the plan. A refinance needs assessment, valuation, documents, discharge and settlement to line up, and any one of those can take longer than you expect. Working backwards from the expiry date rather than forwards from today is the single habit that separates borrowers who have choices from borrowers who have one.
A borrower with an interest-only facility expiring at the end of the financial year starts the conversation nine months out rather than three. The incumbent is asked for pricing and an extension in writing, with current financials and the lease schedule attached, and given a date to respond.
The answer comes back as a partial extension with a principal component. Because there is still time on the clock, the borrower can test that against the market rather than accept it under pressure, and can decide on the numbers instead of the calendar. The borrower who starts in the final month has the same three options on paper and effectively one in practice. Where the timeline has already run out and the facility is under stress, the position is different again, and the guides on a commercial loan covenant breach at interest-only expiry and on refinancing a mortgagee in possession position cover that ground.
One last point on protections, because it is routinely overstated in both directions. Business-purpose credit is not protection-free. It sits outside the National Credit Code, but the unfair contract terms regime still reaches the loan contract and the guarantee, and ASIC applies it where a business employs fewer than 100 people at the time the contract is signed or has a turnover for the last income year of less than $10,000,000. There is a second test that decides whether it reaches your loan at all: for contracts for financial products or services, which is what a loan contract is, the upfront price payable under the contract must not exceed $5,000,000. A facility priced above that cap sits outside the regime even where the business itself meets the size test. The expanded size thresholds have applied since 9 November 2023. Source: ASIC, unfair contract term protections for small businesses, read live 20 August 2026. Qualifier: eligibility depends on the contract and the business at the time of signing, and the regime governs unfair terms, not pricing.
A commercial interest-only expiry is easiest to manage when you separate the dates, the credit decision and the pricing decision. First confirm whether the loan continues after the interest-only date or matures at the same time. Then ask the current lender what it will approve, test the file against current financials and valuation, and compare that real offer with a fully costed refinance. If a valuation, serviceability result or non-renewal decision changes the path, deal with that blocker directly rather than reacting to the headline rate.
Key takeaway: check the interest-only date and the facility maturity date first. Starting six to nine months out usually preserves far more room to negotiate, value, document and refinance than starting in the final weeks.Frequently Asked Questions
If the interest-only period ends before the commercial loan itself matures, the facility will usually switch to principal and interest over the remaining term unless your lender approves a variation. If the interest-only date is also the facility maturity date, the balance may instead need to be renewed, refinanced or repaid. Check both dates in the facility schedule before assuming the next step is simply a higher repayment. A separate balloon payment can create another maturity obligation.
Repricing means negotiating a new interest rate on the loan you already have, with the lender you already have, while refinancing means replacing that loan with a new contract from a different lender. Repricing is the word Australian brokers and bank retention desks use for a rate review, and most borrowers meet it for the first time when someone in the industry says it to them. The practical difference is cost and disruption: repricing leaves the facility, the security and the registrations exactly where they are, whereas refinancing discharges one mortgage and registers another, with government fees and a full credit assessment attached.
You can ask, and on a performing commercial facility an extension is a normal request, but it is an underwriting decision rather than an administrative one. The lender will typically re-test serviceability against current financials, look at the lease or trading position behind the property, check gearing, and ask how the principal eventually gets repaid. Extensions are often granted for a shorter period than requested, or granted with a condition attached such as a principal component or a reduced limit. Income coverage is usually measured through ratios like debt service coverage ratio, so having current figures ready before you ask is the single thing most within your control.
Yes. On a performing commercial facility, a rate review is a normal commercial negotiation. Put the request in writing, name the facility and expiry date, attach current financials and any credible competing indication, and ask for a written answer by a date. Compare commercial offers on the same basis: rate, fees, term, repayment type, security, covenants and exit costs. Do not assume a consumer-style comparison rate will be supplied on a business-purpose commercial loan.
There is no single legislated maximum interest-only period for commercial property lending in Australia. The available period is set by the lender, product and current credit assessment, and a further interest-only term is normally a new decision rather than an automatic continuation. In practice, repeat interest-only becomes harder where serviceability weakens, the lease shortens, the property value falls, gearing rises or there is no credible plan for the principal. Do not import a residential interest-only limit into a commercial facility; check the actual loan terms and current lender policy.
A lower valuation raises the LVR on the same loan amount and can reduce the amount a new lender is willing to advance, change pricing or require more equity or security. Start by checking the property facts, lease assumptions and comparable evidence behind the valuation before changing the structure. If the 2025 Banking Code applies to you as a Small Business and you paid for the valuation, paragraph 97 says the bank will provide a copy of the commercial property valuation and related valuer instruction, except after Enforcement Proceedings have commenced. The commercial LVR guide explains why the resulting percentage matters.
There is no universal three-month notice rule for every commercial loan. Under paragraph 93 of the 2025 Banking Code, a subscribing bank commits to at least three months' notice of a decision not to extend a covered Small Business loan where you are not in Default and the principal is not due to be fully repaid by regular periodic repayments at the scheduled end. The Code's Small Business test includes turnover under $10 million, fewer than 100 full-time equivalent employees and less than $5 million total debt to all credit providers, subject to its exclusions and Business Group rules. Treat three months as a planning floor, not the ideal time to start a refinance.
The government portion of a discharge is a state land registry fee plus an electronic lodgement fee, and both differ by jurisdiction, so there is no single national figure. On the 2026-27 schedules the registry discharge fee runs from $129.20 in Victoria to $248.04 in Queensland, with a standard single-title electronic lodgement fee of $26.29 in NSW and $27.39 in every other jurisdiction, GST inclusive, added on top rather than instead. Tasmania is the only jurisdiction where a discharge costs more than a registration. These are indicative of the published schedules as at 20 August 2026 and they exclude your lender's own discharge, valuation and legal costs, which are set out with the full state by state table in the guide to how commercial property loans work.
Sometimes, but it depends on the borrower, property and lender. Full-doc commercial refinancing usually relies on current financial statements and tax information, while some alt-doc structures can use other evidence and some lease-doc structures focus more heavily on the property's lease income. These are not no-doc loans: they still require evidence, a valuation, acceptable conduct and an LVR within policy, and their pricing or maximum leverage can differ from full-doc lending.
For a performing commercial property loan, starting around six to nine months before interest-only expiry gives you useful time to ask the incumbent, prepare current information, obtain a valuation, compare new credit terms and deal with discharge or security complications. That is practical planning guidance, not a lender rule. Three months is better treated as a minimum planning floor in the Banking Code situations where paragraph 93 applies, not as the ideal time to begin. The refinance timing note sets out the sequence.
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