The most common reason to refinance is a lower interest rate. Even a 0.5% reduction on a $500,000 loan saves around $2,500 per year - more than $75,000 over a 30-year term if the saving compounds. If you have been with the same lender for two or more years without reviewing your rate, you are probably paying more than you need to.
Your fixed rate expiring is an important trigger. At the end of a fixed period, most loans revert to the lender's standard variable rate, which is often significantly higher than what is available in the market. This is an ideal time to compare and switch if a better option exists.
Wanting to access equity is another reason. If your property has increased in value, you may have equity available to fund renovations, an investment property, or other purposes. Refinancing allows you to restructure the loan and release that equity.
Changes to your circumstances - a higher income, a new job, or improvements to your credit profile - can also open up better options than were available when you first borrowed.
Refinancing is not free. Common costs include a discharge fee from your current lender, which covers the administrative cost of closing the loan (typically $150 to $500). There may also be a government mortgage registration fee of around $150 and establishment fees at the new lender - although many lenders waive these or offer cashback to attract borrowers.
If you are still on a fixed rate, break costs can be substantial. Fixed rate break costs are calculated by the lender based on the difference between your fixed rate and current wholesale rates - and they can run into thousands or tens of thousands of dollars. Get a break cost quote from your lender before deciding.
Total refinancing costs are typically $500 to $1,500 on a variable rate loan (not including any fixed rate break costs). If you save $250 per month by switching, you recover the cost within six months.
The basic calculation is: total switching cost divided by monthly saving equals the breakeven period in months. If the breakeven is under 24 months and you plan to stay in the loan for longer than that, refinancing is likely worth it.
Be careful about extending your loan term when you refinance. Switching to a new 30-year loan adds years of repayments. If your goal is to save money overall rather than just reduce the monthly payment, keep your repayments at the current level or higher after refinancing - the lower rate will then reduce your total interest paid rather than just reducing your payment.
A broker does not just look at the headline rate. They compare total loan costs including fees, assess whether the new lender's features match your needs (offset account, redraw, repayment flexibility), confirm you meet the new lender's eligibility criteria, and calculate the realistic saving over the period you plan to hold the loan.
They also check whether your current lender will negotiate. Sometimes the threat of leaving prompts your existing lender to offer a better rate - avoiding the switching cost entirely. A good broker will always test this before recommending you move.
Jason and Steve will compare your current loan against the market, run the savings calculation, and give you an honest answer - at no cost to you.
The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192.