When should I refinance my home loan?

Refinancing is not an annual ritual and it isn't always the answer. It's a tool for a specific problem: your current loan costs more than it should, or does less than you need. Before changing anything, it's worth asking your existing lender for a better rate — a retention discount costs you nothing and sometimes solves the problem outright. Refinance when they won't move, or when what you need isn't a rate.

The triggers worth acting on

A rate gap between what you're paying and what your profile can access. A fixed period ending, where the reversion rate is typically well above new-customer pricing. Equity you want to release for a renovation, an investment deposit or a business. High-interest debts — cards, personal loans, car finance — that could be consolidated at mortgage rates. A change in your situation, such as a partner returning to work, self-employment income now provable, or a property becoming an investment. And a structure that no longer fits: no offset when you now hold savings, no split when you want one, or an investment loan sitting in the wrong name.

What it actually costs

On a standard variable loan, expect a discharge fee from your current lender, state mortgage discharge and registration fees, possible application, valuation or settlement fees at the new lender, and sometimes a title search. Together these usually land somewhere between a few hundred and around a thousand dollars, and plenty of lenders offer cashback or fee waivers that offset them. If you're breaking a fixed rate, get a break cost quote first — that's the one figure that can make refinancing a bad idea outright.

The equity test

Your loan-to-value ratio at the new lender drives everything. Under 80% and you have the full market available to you with no LMI. Between 80% and 90% you'll likely pay a fresh LMI premium, which frequently wipes out the saving — remember LMI isn't portable, so you pay it again. Above 90%, refinancing purely for rate is rarely worth it. Get a realistic view of your property's value before you start, because a valuation shortfall is the most common reason a refinance stalls.

The trap in the numbers

A lower rate on a fresh thirty-year term can mean a smaller monthly repayment and more total interest than you would have paid by staying put. If you're eight years into a loan, refinance to a twenty-two-year term or keep repaying at your old amount. The same caution applies to debt consolidation: moving a five-year car loan into a thirty-year mortgage lowers your monthly outgoings and can easily cost more overall unless you keep the repayment up.

How the process runs

A refinance is assessed like a new loan — full application, income evidence, a valuation and a credit enquiry. Expect a few weeks from application to settlement, most of which is waiting on the outgoing lender's discharge process, which is often the slowest part and worth starting early. Your repayments continue as normal until settlement, when the new loan pays out the old one and any consolidated debts.

A simple rule of thumb

Add up every cost of switching, divide it by the monthly saving, and look at the number of months it takes to break even. Under twelve months is a straightforward yes. One to two years deserves a closer look at whether you'll stay long enough. Beyond that, the reason to refinance had better be structural rather than a rate. Our refinance savings calculator does this arithmetic, and we'll pressure-test it against a real quote before you commit to anything.

The information on this website is general in nature and does not take into account your personal objectives, financial situation or needs. Before acting on any information you should consider whether it is appropriate for you. Terms, conditions, fees, charges and normal lending criteria apply. Rates are subject to change.