When Should You Refinance?
When is the right time to refinance my home loan?
By Andrew, franklenn FINANCE 7 min readUpdated 3 November 2026
The short answer
It's worth looking at refinancing when you can get a meaningfully lower rate or better features, when a fixed rate is about to end, when your property value or income has improved, or when you need to restructure or access equity. The test is simple: do the savings or benefits outweigh the costs of switching, such as discharge fees and any break costs, within a reasonable time? A review every year or two is a good habit, even if you end up staying put.
Detailed explanation
Common reasons to refinance
Refinancing means replacing your current home loan with a new one, either with a different lender or with a new product at your existing lender. People do it for many reasons, but they usually fall into a few groups.
- A lower interest rate, since lenders often offer sharper rates to new customers than existing ones.
- A fixed rate period ending, which typically rolls onto a higher revert rate.
- Better features, such as an offset account or the ability to split the loan.
- Accessing equity for renovations, investing or other goals.
- Consolidating higher-interest debts, with care.
- Restructuring, for example uncrossing properties or separating investment and personal debt.
Do the costs stack up?
Switching usually involves some costs: a discharge fee from your current lender, government fees to register and remove mortgages, and sometimes application or valuation fees with the new lender, though many waive these. If you're on a fixed rate, breaking it early can trigger a break cost, which can be large when rates have fallen.
A simple way to think about it is a break-even point: divide the total switching costs by the monthly saving. If you'd recover the costs within a year or so, and you plan to keep the loan longer than that, refinancing often makes sense. Cashback offers can help, but they shouldn't be the main reason to move.
Remember too that the lowest advertised rate isn't always available to you. Pricing often depends on your LVR, loan size and whether the loan is owner-occupied or investment, so compare offers that genuinely apply to your situation.
Ask your current lender first
Sometimes a phone call is enough. Lenders will often reduce your rate to keep you, especially if you can point to a specific competing offer. As your broker we can benchmark your loan against the wider market and help you have that conversation, or move you if a better outcome sits elsewhere.
If your lender won't move, or the gap to the best offers is still large, that tells you something useful. Loyalty rarely earns a discount on its own, so it's worth knowing what's out there even if you have a good relationship with your bank.
When refinancing might not suit
Refinancing isn't always the right move. If your financial position has weakened, for example your income has dropped or your property value has fallen, you may not qualify with a new lender, or you might end up paying LMI if your LVR is above 80%. Large fixed rate break costs can wipe out the benefit. And if you're planning to sell soon, the savings may not have time to add up.
- Income has dropped or become less stable.
- LVR is above 80% and LMI would apply again.
- Fixed rate break costs outweigh the savings.
- You're likely to sell within a short time.
Watch the loan term
When you refinance, the new loan often resets to a 30-year term. That lowers repayments, but if you had 24 years left, you've just added six years of interest. Ask to match your remaining term, or keep making your old repayment, so the lower rate shortens your loan instead of stretching it.
Worked example
Is it worth switching from 6.69% to 5.94%?
An illustrative example. A homeowner owes $534,800 with 26 years remaining at 6.69% p.a. A new lender offers 5.94% p.a. over the same 26-year term. Total switching costs are estimated at $1,150.
| Current monthly repayment at 6.69% | $3,620.43 |
| New monthly repayment at 5.94% | $3,369.11 |
| Monthly saving | $251.32 |
| Annual saving | About $3,016 |
| Estimated switching costs | $1,150 |
| Break-even point ($1,150 / $251.32) | About 4.6 months |
The homeowner would recover the switching costs in under five months and save about $3,016 a year after that, assuming rates stay the same. That's a strong case to refinance or to ask the current lender to match. Your numbers will differ, so check with our refinancing savings calculator.
Illustrative only. Figures are examples, not a quote or a recommendation.
Common mistakes
- Never reviewing your rate because switching feels like a hassle.
- Chasing a cashback without comparing the ongoing rate.
- Resetting to a 30-year term without realising the extra interest.
- Ignoring break costs on a fixed rate loan.
- Refinancing to a loan without features you rely on, such as an offset account.
Frequently asked questions
Next steps
Talk to franklenn FINANCE
If it's been a while since you reviewed your home loan, book a free discovery call with franklenn FINANCE and we'll check how your rate and features compare.
This guide is general information only and does not consider your objectives, financial situation or needs. It is not financial, tax or legal advice. Lender policies, rates and government schemes change. Please speak with us, and with your accountant or solicitor where relevant, before acting.