When Should You Refinance Your Home Loan? 5 Signs It's Time

When was the last time you checked your home loan rate against the current market?

Most homeowners cannot recall the exact date.

If that sounds like you, the bank might be charging you a “loyalty tax” for sticking around.

We frequently see clients paying significantly more than necessary simply because they haven’t reviewed their mortgage in over two years.

Refinancing can save thousands over the life of your loan, but it is not always the right move.

You need to know exactly what to look for before submitting an application.

Here are five specific signs it might be time to switch and the scenarios where staying put is the smarter financial play.

Sign 1: Your Rate Is Higher Than Current Market Rates

The most obvious sign is a discrepancy between what you pay and what new customers receive.

In the Australian mortgage market, this gap is often referred to as the “front book” versus “back book” pricing strategy.

Lenders often offer aggressive discounts to attract new business while leaving existing customers on higher variable rates.

Recent data suggests the difference between these groups can be as high as 0.50% to 0.75%.

How to check:

• Look at the interest rate listed on your most recent banking statement.
• Compare that number to the “new customer” rates advertised on your lender’s own website.
• Check comparison sites for similar products with the same Loan to Value Ratio (LVR).
• Focus on the comparison rate, not just the headline rate, as this includes fees.

Rule of thumb: If you are paying 0.5% or more above the market average for a similar product, an investigation is mandatory.

Potential Savings Analysis:

Loan Balance	Rate Difference	Annual Interest Savings	Monthly Cash Flow Boost
$400,000	0.50%	~$2,000	~$166
$600,000	0.50%	~$3,000	~$250
$800,000	0.50%	~$4,000	~$333
$1,000,000	0.50%	~$5,000	~$416

Sign 2: Your Fixed Rate Is About to End

Homeowners coming off fixed rates in 2025 or 2026 often face a stark reality.

If you locked in a rate below 3% a few years ago, the jump to the current variable market can be substantial.

The “Revert Rate” Trap:

1. Your loan automatically rolls over to the lender’s “standard variable rate” when the fixed term expires.
2. This specific rate is rarely the lender’s most competitive offer.
3. We see many banks set this revert rate 1% to 2% higher than their best available variable product.

Action Plan:

• Set a calendar reminder for 3 months before your fixed term expires.
• Contact your current lender to ask specifically what your new variable rate will be.
• Compare that offer against the broader market immediately.
• Initiate the refinance process at least 6 weeks before the expiry date to ensure a smooth transition.

Sign 3: Your Circumstances Have Improved

Lenders determine your interest rate based on risk.

If your financial position is stronger today than when you first applied, you are a lower risk to the bank.

We encourage clients to leverage this improved status to demand better pricing tiers.

Improved Equity Position (LVR Tiers)

Most Australian lenders have pricing “tiers” based on your Loan to Value Ratio (LVR).

• < 80% LVR: You generally avoid Lenders Mortgage Insurance (LMI).
• < 70% LVR: Many banks unlock a “silver” tier of lower rates.
• < 60% LVR: This is often the “gold” tier where the absolute lowest rates are available.

If your property value has risen or you have paid down principal, you might have crossed into a new tier without realizing it.

Stronger Income and Employment

Lenders favor stability.

• Salary increases improve your servicing capacity.
• A partner returning to work boosts household income.
• Passing a probation period at a new job removes a common red flag.

Cleaner Credit History

Time heals most credit report issues.

• Defaults generally disappear from your file after five years.
• Comprehensive Credit Reporting (CCR) means positive behavior, like paying bills on time, now boosts your score.
• Higher credit scores can unlock lenders who were previously out of reach.

Sign 4: You Need Features Your Current Loan Doesn’t Have

Sometimes the interest rate is not the primary driver for a switch.

We find that structural flexibility often saves clients more money than a 0.10% rate reduction.

Essential Features to Consider:

1. Multiple Offset Accounts A standard redraw facility is not the same as an offset account. An offset account is a separate transaction account linked to your loan. Every dollar in it reduces the interest calculation daily. This is critical for tax effectiveness if you ever turn your home into an investment property.

2. Fast Redraw Access Modern loans often support the New Payments Platform (NPP) or Osko. This means if you need to pull extra money out of your loan, it arrives in your spending account instantly, rather than taking 24-48 hours.

3. Split Loan Capability You may want to hedge your bets against rate movements. A split facility allows you to fix 50% of the debt while leaving 50% variable to utilise an offset account.

4. Portability If you plan to move house soon, “portability” allows you to transfer the loan to a new property. This avoids the hassle of reapplying and paying new establishment fees.

Sign 5: You Want to Consolidate Debt

Managing multiple high-interest debts is stressful and expensive.

Rolling these debts into your home loan can immediately improve monthly cash flow, but it comes with a major warning.

The Interest Rate Arbitrage:

• Credit Cards: Average 18% - 22% p.a.
• Personal Loans: Average 8% - 15% p.a.
• Car Finance: Average 7% - 12% p.a.
• Home Loan: Significantly lower variable rate.

The “Term Extension” Danger: Spreading a $30,000 car loan over a 30-year mortgage term will cost you massive amounts of interest, even at a lower rate.

You must increase your mortgage repayments to pay off that consolidated chunk within its original timeframe (e.g., 5 years).

Consolidation Strategy Comparison:

Debt Type	Original Term	Mortgage Term	Monthly Payment	Total Interest Paid
$30k Car Loan (10%)	5 Years	N/A	~$637	~$8,200
Consolidated (6%)	N/A	30 Years	~$180	~$34,700
Consolidated (6%)	N/A	5 Years (Smart Strategy)	~$580	~$4,800

When Refinancing Might NOT Be Worth It

Changing lenders is not free, and it is not always the correct strategy.

We advise caution in the following specific scenarios.

1. High Break Costs on Fixed Loans

Breaking a fixed-rate contract early triggers an “economic cost” fee. If wholesale rates have dropped since you fixed, this fee can be thousands of dollars. Always ask for a “break cost quote” before proceeding.

2. Recent Employment Changes

Lenders prefer stability. If you are currently on probation at a new job or have recently become self-employed (less than 1-2 years), your application might be declined or restricted to higher-rate specialty lenders.

3. Increased LVR

If property prices in your suburb have softened, your equity might be lower than you think. If your LVR pushes back above 80%, you might have to pay Lenders Mortgage Insurance (LMI) again. This premium usually outweighs any interest rate saving.

4. Small Loan Balances

If you owe less than $250,000, refinancing might not be viable. Many lenders reserve their best cashback offers (if available) and lowest rates for balances over this threshold. The switching costs usually erode the benefits on smaller loans.

5. Selling Imminently

Recouping the costs of refinancing takes time. This “break-even point” is typically 12 to 18 months. If you plan to sell the property next year, you will likely lose money on the switch fees.

Before You Refinance: Try Negotiating First

Your current lender does not want to lose you.

Client retention teams often have access to discretionary rates that are not advertised to the public.

The “Discharge Authority” Strategy:

1. Research the best rates currently available in the market.
2. Call your bank and ask for the “Mortgage Discharge Authority” form.
3. This specific request usually escalates your call immediately to the retention team.
4. State clearly: “I can get X% at Bank Y. Can you match this, or should I proceed with the discharge?”

Potential Outcomes:

• Best Case: They match the rate immediately. You save money with zero paperwork.
• Middle Case: They offer a small discount. You then calculate if the remaining difference is worth moving for.
• Worst Case: They say no. You proceed with the refinance plan you already prepared.

The Refinancing Process

Understanding the timeline helps reduce stress.

We typically see the end-to-end process take between two to four weeks, depending on the lender’s current backlog.

Phase 1: Review & Apply (Days 1-7)

• Collection of payslips and identification.
• Calculation of borrowing power and serviceability.
• Submission of the digital application.

Phase 2: Assessment & Valuation (Days 8-14)

• The new lender assesses your credit file.
• A property valuer checks the home’s current market value (often done digitally).
• Formal approval is issued (“Unconditional Approval”).

Phase 3: Settlement (Days 15-30)

• Loan documents are signed (often digitally).
• The new lender contacts your old lender to arrange the debt payout.
• Settlement occurs, and your new loan repayments begin.

Ready for a Free Loan Review?

Determining if a switch is worth the effort requires accurate numbers.

Our refinancing service includes free, no-obligation loan reviews to help you see where you stand.

Our team will review your current position, compare it against the broader market, and provide an honest assessment of your break-even point.

Even if refinancing isn’t right for you, you will have the confidence of knowing your current deal is competitive—or we might help you negotiate a better rate with your current lender.