The short answer
It’s worth reviewing your home loan when your fixed rate is ending, when you’ve been with the same lender for a few years, when your equity has grown, or when your plans change. Refinancing makes sense when the saving or benefit over the time you’ll keep the loan clearly outweighs the cost of switching.
7 signs it’s worth a review
1. Your fixed rate is ending
When a fixed term ends, your loan usually rolls to a variable rate, which may not be your lender’s sharpest. Comparing two or three months before the end date gives you time to act.
2. You’ve been with the same lender for years
Lenders often offer new customers better rates than existing ones. If you haven’t checked in a while, your rate may have drifted.
3. Your equity has grown
As you pay down the loan and values rise, your LVR falls. Some lenders price lower LVRs more sharply. See our LVR guide.
4. You want to use your equity
For a renovation, an investment property or to consolidate debts. Refinancing can be done together with a top-up.
5. Your loan no longer fits
You want an offset account, a split loan, or to drop a package fee you don’t use.
6. Your life has changed
A new job, a bigger family, separation or a plan to move or invest.
7. Your income or credit has improved
If you were with a specialist lender because of past credit or new self-employment, a mainstream lender may now be an option.
Recognise one of these? A review shows whether a switch is worth it.
Book My Loan ReviewWhen refinancing may not be worth it
- High break costs on a fixed loan can outweigh the saving.
- A small loan or a short time left means less to gain.
- You’re about to sell or make another big change soon.
- Your finances are under pressure, such as a recent job change, reduced income or new debts, which may make approval harder.
- The new loan stretches the term back to 30 years without extra repayments, which can mean more interest in total.
Weighing the cost of switching
Typical costs include a discharge fee from your current lender, government fees to change the mortgage registration, and sometimes application or valuation fees. Some lenders offer a refinance cashback, which can offset part of these, but shouldn’t be the reason to switch.
Add up the switching costs. Then estimate the yearly saving from the new loan, using the actual rates, repayments and fees of both loans. Divide the cost by the yearly saving to see how many years it takes to break even, and compare that with how long you expect to keep the loan.
A simple guide only. Savings depend on the rates, fees and switching costs involved, and you may not save money by refinancing.
How a broker helps
We compare your loan with options from a panel of 40+ lenders, work out the switching and break costs, and show you whether a change is worth it. If staying where you are, or asking your lender for a better rate, makes more sense, we’ll tell you.
Mortgage broker at My Finance Consultants. Daniel compares home loan options from a panel of 40+ lenders for refinancers, investors and home buyers, by phone or video, evenings included. About Daniel
General information only. It doesn’t consider your objectives, financial situation or needs, and it isn’t tax, legal or financial product advice. Lending criteria, fees and charges apply.