When Might Refinancing a Home Loan Be Worth Considering?
From securing a lower rate to accessing equity for renovations, explore the main reasons homeowners choose to refinance.
Refinancing is generally worth considering when the financial benefit—such as interest savings, debt consolidation, or accessing equity—outweighs the costs of switching lenders and the effort involved in the application process.
How refinancing benefits work
Refinancing involves replacing your current home loan with a new one. Homeowners typically do this to secure a lower interest rate, switch between fixed and variable rates, access better loan features (like an offset account), or release equity to fund renovations or a deposit for an investment property.
Illustrative example
Illustrative example: Your fixed-rate period is expiring, and your loan is rolling onto your lender's standard variable rate of 6.80%. By refinancing to a different lender offering 6.10%, you could save thousands of dollars in interest over the next few years, easily covering the $800 in switching costs.
What may change the outcome
Refinancing is only viable if you still meet current lending criteria. If interest rates have risen significantly since you first got your loan, your borrowing capacity may have decreased. If your property value has dropped, you might not have enough equity to refinance without paying LMI.
Common misunderstandings
Many people believe they should refinance every year to chase the lowest rate. However, constantly switching can incur unnecessary government and discharge fees, and multiple credit enquiries can temporarily impact your credit score.
When a personal review may help
If you haven't reviewed your loan in over two years, your current lender is likely charging you a "loyalty tax" compared to the rates they offer new customers. A broker can negotiate with your current lender first, and if they won't reduce the rate, help you refinance elsewhere.
Next step
Visit our Refinancing service page to understand the process, or use the calculators to estimate your potential savings.
This article provides general information only and does not take into account your objectives, financial situation or needs. It does not constitute personal credit, financial, tax or legal advice. Lending outcomes depend on individual circumstances, lender policy and assessment.
Have questions about your situation?
Every home loan scenario is unique. Speak directly with Cameron or Matthew to get clear answers.