Refinancing is not always the right move — but staying in an uncompetitive loan when you should refinance costs you thousands every year. Here is how to know when refinancing makes sense and when it does not.
Lenders consistently offer their best rates to new customers. If you have not had your rate reviewed in the past year to 18 months, there is a very good chance you are paying more than you need to. The difference between a loyal customer rate and a competitive new customer rate is often 0.3% to 0.8%, which on a $600,000 loan is $1,800 to $4,800 per year.
When a fixed rate period ends, your loan reverts to the lender's standard variable rate — which is often not their most competitive rate. The expiry of a fixed period is the ideal time to review: you have no break costs, and you can refinance to a competitive rate at another lender or negotiate aggressively with your current one.
If your income has increased, your LVR has reduced (through repayments or property value growth), or your credit position has improved since you first took out the loan, you may now qualify for better rates or products than were available to you originally. Lendology assesses your current position and advises on what has changed.
If your property has increased in value, you may be able to refinance to access the equity for renovations, an investment deposit, or debt consolidation. Refinancing for equity access makes sense when the purpose of the funds generates a return — financial or lifestyle — that exceeds the cost of the additional borrowing.
Refinancing is not worthwhile if you are deep into a fixed rate term with significant break costs, if the rate saving is so small that you would not recoup switching costs for years, or if your loan balance is very low and the saving in dollar terms is minimal.
Lendology does the numbers honestly. We have told clients to stay with their current lender when the evidence does not support switching — we only recommend refinancing when it genuinely benefits you.
Book a free review with Lendology. We compare your current rate against the market and give you a clear picture of what is available — with no obligation to proceed.
The saving depends on your loan balance, current rate, and how much better the available rates are. Lendology calculates your specific saving, including all switching costs, before recommending any action.
A formal application generates a credit enquiry. We minimise this by identifying the right lender before applying rather than submitting multiple applications simultaneously.