Refinancing your home loan is one of the most impactful financial decisions you can make — or one of the most costly mistakes, if the timing's wrong. I speak to people every week who've either stayed in a bad loan too long or refinanced at entirely the wrong time. This guide will help you figure out which camp you're in.
The case for refinancing
The most obvious reason to refinance is a better interest rate. On a $600,000 loan, dropping your rate by just 0.5% saves you around $175 per month — that's $2,100 per year and over $63,000 across a 30-year loan. But refinancing can do more than cut your rate: it can unlock equity for renovations or an investment deposit, consolidate high-interest debts like credit cards, add features you don't currently have (offset account, redraw facility), or change your loan structure as your circumstances change.
When refinancing doesn't make sense
Refinancing isn't free. There are discharge fees from your current lender (typically $150–$400), application fees with the new lender, potential break costs if you're in a fixed rate, and the time and paperwork involved. If you're selling in the next 12–18 months, the costs may outweigh the savings. If you've just fixed your rate and rates have dropped, your break costs may be prohibitive. And if your circumstances have changed — income reduced, new debts — you may not qualify for the product you want.
How to calculate if it's worth it
The simple test: divide the total switching costs by the monthly saving. That gives you your break-even period in months. If you're planning to stay in the loan longer than that break-even point, refinancing makes financial sense. For example, if switching costs $2,000 and saves you $200/month, your break-even is 10 months. Most clients break even in under 18 months.
The loyalty tax — are you paying it?
Banks routinely offer their best rates to new customers and let existing borrowers drift. It's called the loyalty tax — and it's real. Data from the Reserve Bank of Australia consistently shows that new borrowers receive lower rates than existing borrowers with the same loan profile. If you haven't reviewed your rate in two or more years, there's a very good chance you're paying more than you need to be. Book a call and I'll check for you — free, no obligation.
Ready to find out where you stand?
I'll compare your current loan against the best available options across 40+ lenders and give you a straightforward recommendation — whether that's to refinance now, wait, or negotiate with your current lender. No pressure either way.