Beginner's Guide to When to Refinance Your Home Loan

If your home loan has not been reviewed in a while, it is probably time to take a look. The right moment to refinance is when the savings or features you gain are clearly bigger than the costs of switching.

For Newcastle homeowners, that moment often arrives quietly. A fixed rate ends, your life changes, or you notice your repayments feel heavier than they should. This guide walks through the signs to look for and the trade-offs to weigh up.

When Should You Refinance Your Home Loan?

You should consider a refinance when your rate looks high compared with what lenders offer new customers, your fixed rate is ending, your finances have changed, or your loan no longer suits your goals. Any one of these is a good reason to run the numbers.

The RBA cash rate sits at 4.85% p.a., and lenders set their own rates from there. Rates differ between lenders and depend on your deposit size and loan type, so a loan that suited you when you signed may no longer be competitive today. A quick loan health check shows how your current loan compares.

Fixed Rate Expiry: What Happens When You Come Off a Fixed Rate

When a fixed rate period ends, most loans roll onto the lender's standard variable rate unless you choose a new option. That rate may be higher than what you could get by shopping around.

It pays to start looking a couple of months before your fixed term ends. That gives you time to compare lenders, gather paperwork and line up a new loan so there is no gap. You can then choose to switch to variable, fix again, or split your loan between both. Fixing gives certainty but limits extra repayments and can mean break costs if you leave early. Variable gives flexibility but your repayments can rise if rates go up.

How Much Could a Lower Interest Rate Save You?

Even a small drop in your rate can reduce your repayments, but the saving needs to be weighed against any fees from leaving your current lender and setting up the new one.

As an example, take a Newcastle couple with a $600,000 loan and 25 years remaining. At an illustrative rate of 6.75% p.a., their monthly principal and interest repayment is about $4,145. They refinance to an illustrative rate of 6.25% p.a. over the same 25 years, and the repayment falls to about $3,958. That is roughly $187 a month, or about $2,240 a year. If discharge and application fees came to around $600, they would recover that cost within a few months.

The trade-off is that the new lender may have different fees, features or rules. Use our loan repayment calculator to test your own figures.

Can You Refinance to Access Equity?

Yes, you can refinance to access equity if your property value has grown or your loan has shrunk, and the lender is happy with your income and expenses. Equity is the gap between what your home is worth and what you owe.

People use it for renovations, to buy an investment property or to put towards their next home. A lender will usually order a property valuation to confirm the figure. Borrowing more means a larger loan and more interest over time, so it should serve a clear purpose. If you are planning to invest, our investment loans page explains how equity can be used for a deposit. Your borrowing capacity also matters, because lenders will test whether you can afford the higher loan.

Refinance Features: Offset Accounts, Redraw and Cashflow

Refinancing can give you features such as an offset account or redraw facility, which can help you reduce interest and improve cashflow. Neither is automatically included, and some loans charge a higher rate or an annual fee for them.

An offset account is a transaction account linked to your loan. The balance is subtracted from your loan when interest is calculated, so you pay interest on less. Redraw lets you withdraw extra repayments you have made, though access can have limits depending on the lender. If you keep a decent savings balance, an offset can be worth the fee. If you rarely hold spare cash, a basic low-fee loan may suit you better.

Refinance Process: What Happens Step by Step

The refinance process usually involves comparing loans, submitting an application, having the property valued, receiving approval and settling with your old lender. The timing varies by lender and how quickly your documents are ready.

Your broker handles most of the back and forth. You will confirm your income, spending and existing debts, and the new lender pays out your old loan on settlement day. Our refinancing page outlines how we support you through each stage.

When Refinancing Might Not Be Worth It

Refinancing may not be worth it if the savings are small, you are on a fixed rate with high break costs, or you are near the end of your loan. Fees and a longer loan term can cancel out any benefit.

As an example, a homeowner sees a lower rate and wants to switch. A review shows exit fees and fixed rate break costs would wipe out most of the first year's saving. The better move is to wait until the fixed term ends, then refinance. They set a reminder for two months before expiry, and when it arrives they switch with no break costs. If you restart a loan on a new 30 year term, you may also pay more interest overall even with a lower rate, so keeping your repayments at the same level can help.

If you are paying more than you would like or your loan no longer fits your life, we are here to help. Call one of our Newcastle team or book an appointment at a time that works for you, and we will go through your options in plain language.

Frequently Asked Questions