When Should You Refinance Your Home Loan?

Refinancing is replacing your existing home loan with a new one — either with your current lender or a different one. The new loan pays out the old one, and you continue repaying the new arrangement from there. The reasons people do it vary, but the mechanics are the same each time: an application is assessed, the property is valued, the loan is approved on the lender’s terms, and at settlement the old loan is discharged and the new one registered against the property.

It helps to separate two things that often get blurred. Refinancing is the act of switching loans; the goal behind it might be a lower rate, releasing equity, changing the loan’s structure, or consolidating debts into the mortgage. The goal is what makes a refinance worth considering, but the switch itself carries costs and conditions that apply regardless of the goal. Keeping those two ideas distinct is what lets you judge whether a given refinance is genuinely worthwhile.

• A new loan replaces and pays out the existing one
• The lender assesses the application against its own lending criteria
• The property is usually revalued as part of the process
• At settlement the old loan is discharged and the new one registered

Our broader explanation of the process and product types sits on our refinancing page, which this guide is intended to complement.

Most refinances begin with a trigger — a change that makes you wonder whether the current loan still fits. None of these signals means you should refinance; each is a reason to look more closely. The most common is a rate roll-off: an introductory, honeymoon or discounted rate ending and reverting to a higher ongoing rate, often without any prompt from the lender. Quietly slipping onto a revert rate is one of the most frequent reasons borrowers end up paying more than they need to.

The end of a fixed term is another natural review point. When a fixed period expires the loan usually rolls to a variable rate, and that is the moment to check whether the new rate and structure are still right rather than letting it drift. A build-up of equity is a third trigger, whether you want to use it for a renovation, an investment deposit or another purpose. A structure that no longer suits how you manage money — say you now hold a steady offset balance, or your income pattern has shifted — is a fourth. And a life change such as a new job, a growing family or a change in goals can make a loan that fitted three years ago feel wrong today.

• A discounted or fixed rate rolling off to a higher revert rate
• A fixed term ending and the loan moving to variable
• Equity that has grown and a genuine use for it
• A loan structure that no longer matches how you operate
• A change in income, employment or family circumstances

The reason a refinance review matters is that the saving people imagine from a lower rate is frequently eaten away by the cost of switching. Knowing these costs in advance is what turns a hopeful guess into a real decision. Your current lender will usually charge a discharge or release fee, and there are government fees to change the mortgage registration. The incoming lender may charge application, valuation or settlement fees. Individually these are modest; together they add up, and they have to be earned back before any saving is real.

Two costs deserve particular attention because they can be large enough to reverse the whole decision. The first is lenders mortgage insurance: if your loan-to-value ratio is above the threshold where this applies, refinancing can re-trigger the premium, and any insurance you paid on the original loan is generally not refunded or transferred. The second is break costs on a fixed-rate loan. Exiting a fixed term early can attract a break fee that, depending on the loan and where rates have moved, is sometimes substantial — and large enough to make refinancing during a fixed period a poor idea. We flag both of these early so they are weighed before you are committed, not discovered at settlement.

You can see how loan features such as offset accounts, redraw and fixed versus variable terms shape these trade-offs in our guide to loan features explained, which is worth reading alongside any refinance decision.

The headline rate is the worst possible basis for a refinance decision, because it ignores everything that determines whether switching pays off. A proper comparison looks at the total cost of staying with your current loan against the total cost of moving, measured over the period you realistically expect to hold the loan. That total includes the ongoing repayments under each option, the switching costs to get into the new loan, and any difference in fees and features over time.

A useful way to frame it is the break-even point: how long it takes for the saving from the new loan to recover the cost of switching. If you expect to keep the loan well beyond that point, the refinance has time to pay for itself; if you might sell, repay or switch again before then, the costs may never be recovered. Two loans with the same advertised rate can produce very different total costs once fees, features and your actual usage are counted — an offset account you genuinely use, for example, can matter more than a small difference in rate. This is general information and not a promise of any particular saving; the figures depend on your loan, your usage and the lender’s pricing.

A refinance review is just as valuable when it confirms you should stay put, and there are several situations where that is the right answer. If you are partway through a fixed term, the break costs alone can cancel out any rate saving, so the timing usually argues against switching until the fixed period ends. If your equity has slipped or your loan-to-value ratio would push you back over the lenders mortgage insurance threshold, the new premium can easily exceed the benefit of a lower rate.

Timing of a different kind also matters. If you only intend to hold the loan for a short period — because a sale, a move or a major repayment is on the horizon — the switching costs may never be earned back. And if your income or employment has changed recently, a new application may be assessed less generously than the loan you already hold, so a refinance could leave you worse off or simply be declined. In each of these cases the sensible outcome of a review is to do nothing for now, and to revisit it when the picture changes. Any approval, of course, still depends on the lender’s assessment and its lending criteria.

A review starts with your current loan — the rate, the balance, the structure, any fixed term and the features you actually use. From there we look at where you are today: your equity, your income, your commitments and your goals, because those determine both whether a switch helps and whether a lender is likely to approve it. We then compare the total cost of staying against the total cost of moving across a panel of lenders, counting the switching costs rather than the rate alone.

If a switch is worthwhile, we explain the trade-offs, the documents needed and the steps from application to settlement, and we are clear that any approval rests on the lender assessing your circumstances against its criteria. If it is not worthwhile, we say so plainly. Where a refinance is the right move, getting a clear picture of your borrowing position early helps, which is why a refinance review often sits alongside a pre-approval so you know where you stand before committing. In most residential lending scenarios, the lender pays broker commission; we explain remuneration in our Credit Guide.

The next step is a short, no-obligation conversation about your current loan and whether a review is worth your time. Get in touch and we will help you work out whether refinancing genuinely stacks up for you, or whether staying where you are is the better call.

This guide is general information only and does not take into account your objectives, financial situation or needs. Refinancing is not automatically beneficial; switching costs such as discharge, application and settlement fees, a re-triggered lenders mortgage insurance premium, and break costs on a fixed loan can offset or exceed any saving. It is not credit advice; any loan approval depends on the lender’s assessment, the lender’s lending criteria and your individual circumstances. Personal credit advice scoped to your situation is available through an engagement with Eternity Mortgage Solutions.