When to Refinance Your Home Loan

Refinancing works when the benefit outweighs the cost of switching.

That calculation changes depending on your loan size, how long you plan to stay in the property, and what's shifted since you first borrowed. For residents in Croydon, where many own weatherboard cottages or established brick homes they've held for years, the loan they set up five or ten years ago might not suit what they need now.

Your Fixed Rate Period Is Ending

When your fixed rate expires, your loan reverts to the lender's variable rate. That revert rate is often higher than what new borrowers receive, sometimes by half a percent or more.

Consider a borrower in Croydon who fixed at 2.1% three years ago on a loan of $550,000. When that term ends, their lender's revert rate sits at 6.8%, while new borrowers with the same lender are being offered 6.3%. Staying with the existing lender means paying more for no reason. Refinancing to a lender offering a lower ongoing rate, or switching back to a fixed term if rates are expected to rise further, can reduce monthly repayments and total interest paid over the remaining loan term.

You'll want to compare what you're reverting to against what's available elsewhere at least three months before your fixed term ends. That gives you time to apply, settle, and avoid even one month on the higher revert rate.

You're Paying More Than the Current Market Rate

Interest rates shift constantly, and lenders don't automatically move existing customers to lower rates when they become available.

If your current variable rate sits above what new customers are being offered by other lenders, you're likely paying more than you need to. Even a difference of 0.3% on a loan of $500,000 can cost you several thousand dollars a year. We regularly see borrowers in Croydon who've been with the same lender since they bought near Croydon Station or around The Strand, unaware that their rate has drifted well above what's now available. A loan health check will show you where your rate sits compared to the current market and whether refinancing makes sense once you account for application fees, discharge costs, and any break fees if you're still within a fixed period.

Discharge fees typically sit between $300 and $500, and most lenders charge an application fee of around $600. If refinancing saves you $3,000 a year, those costs are recovered in a few months.

You Need to Access Equity for a Deposit on an Investment Property

Property values in Croydon have risen steadily over the past decade, and many homeowners now sit on usable equity without realising it.

Equity is the difference between what your property is worth and what you owe. If your home is valued at $1,200,000 and your loan balance is $600,000, you have $600,000 in equity. Most lenders will let you borrow against up to 80% of your property's value without paying lender's mortgage insurance. In this scenario, 80% of $1,200,000 is $960,000. Subtract the existing loan of $600,000, and you could access up to $360,000 in usable equity. That's enough for a deposit on an investment property or to fund a renovation that increases the value of your home further.

Refinancing to release equity involves increasing your loan amount and using the additional funds for a specific purpose. Lenders will want to see what the funds are for, and they'll revalue your property as part of the application. If you're accessing equity to buy an investment property, the rental income from that property can sometimes be used to support your borrowing capacity, depending on how the lender assesses it.

Your Loan No Longer Matches How You Use Money

The features you needed when you first borrowed might not be the features you need now.

Some borrowers prioritise an offset account because they keep cash reserves for tax purposes or irregular expenses. Others value redraw facilities, or the ability to make extra repayments without restriction. If your current loan charges a monthly fee for an offset account you no longer use, or restricts extra repayments in a way that doesn't suit how you manage money, refinancing lets you move to a loan structure that works for your situation. In our experience, borrowers in Croydon who've shifted from full-time work to contracting or self-employment often benefit from offset accounts because they can park income in the account and reduce interest without locking funds away.

Loan features vary widely between lenders. Some charge $10 to $15 a month for offset accounts, others include them at no cost. Some allow unlimited extra repayments, others cap them or charge fees if you exceed a set amount. Refinancing gives you the chance to choose a loan that aligns with how you actually use your money, rather than paying for features you don't need or missing out on ones you do.

You Want to Consolidate Debt Into Your Mortgage

If you're carrying personal loan debt, car finance, or credit card balances with interest rates above 8%, consolidating that debt into your mortgage can reduce your overall interest cost and improve your monthly cashflow.

A borrower in Croydon with a $480,000 mortgage at 6.4% and a $35,000 car loan at 9.2% is paying more interest on the car loan than necessary. Refinancing the mortgage to $515,000 and clearing the car loan means the entire debt is charged at the lower home loan rate. Monthly repayments often drop because the debt is spread over a longer term, though you'll want to make extra repayments where possible to avoid paying more interest over time. Lenders will reassess your borrowing capacity when you apply, and they'll want to see that consolidating the debt improves your financial position rather than just shifting it around.

Consolidation works when the interest rate difference is significant and when you have a clear plan to manage repayments going forward. It doesn't work if you clear the car loan and credit cards, then rebuild that debt again while still carrying the higher mortgage balance.

You've Improved Your Financial Position Since You First Borrowed

If your income has increased, your expenses have dropped, or your credit file has improved, you may now qualify for loan products that weren't available to you when you first borrowed.

Lenders assess borrowers differently depending on income, employment type, and credit history. A borrower who qualified for a non-bank lender or a higher-rate product a few years ago might now meet the criteria for a major bank's standard variable loan with a lower rate and more features. Refinancing in this situation isn't just about switching lenders, it's about accessing a better product category because your circumstances have changed.

We regularly see this with self-employed borrowers in Croydon who've been in business for a few years and now have two full years of tax returns showing stable or growing income. That opens up access to lenders who wouldn't have considered the application when the business was newer. The same applies to borrowers who've cleared defaults or late payments from their credit file and now meet serviceability requirements they didn't previously.

The Costs of Refinancing Don't Outweigh the Benefit

Refinancing makes sense when the interest saved exceeds the cost of switching, and when you're planning to stay in the property or hold the loan long enough for that saving to accumulate.

If refinancing costs $1,500 in fees and saves you $200 a month, you break even in eight months. After that, the saving is real. But if you're planning to sell the property within the next year, or pay off the loan in full, the timing might not work in your favour. Every situation is different, and the calculation depends on your loan size, the rate difference, and how long you'll hold the loan after refinancing. A quick comparison of your current rate, the rate you can access, and the total cost of switching will tell you whether it's worth proceeding.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions