Refinancing: When It's Worth It, and When It Isn't
Loyalty is a lovely quality in people and an expensive one in home loans. Lenders reserve their sharpest rates for new customers, which means the longer you’ve had your loan, the more likely you’re paying what the industry politely calls a ‘loyalty tax’.
Refinancing - moving your loan to a new lender, or renegotiating with your current one - is how you claw that back. But it isn’t automatically worth it, and anyone who tells you it always is, is selling something. Here’s how I’d think it through.
The signs a review is due
It’s been more than two years since you set up or last reviewed the loan. Your rate starts with a number that makes friends wince. Your fixed term is ending soon (this one sneaks up - the revert rate is rarely kind). Your circumstances changed: income up, family bigger, renovation planned, investment property on the horizon. Or you simply have no idea what rate you’re on - which is the most common one, and nothing to be embarrassed about.
A review doesn’t commit you to anything. Sometimes the answer is ‘your loan is actually fine’ - I’ve said it plenty of times, and clients remember that more than any rate I’ve found.
What switching actually costs
Refinancing isn’t free, and the costs belong in the maths: discharge fees from your old lender, application or settlement fees at the new one, government registration fees, and - if your equity is under 20% - potentially Lenders Mortgage Insurance again, which can sink the whole case.
The question is never ‘is the new rate lower?’ It’s ‘after all costs, how many months until I’m ahead - and will I keep this loan that long?’ If the break-even is 18 months and you’re planning to sell next year, the shiny rate is a mirage.
It’s not always about the rate
Some of the best refinances I’ve done barely moved the interest rate. They consolidated ugly debts into something manageable, unlocked equity for a renovation or investment, added an offset account that suited how the household actually banks, or restructured a loan so a small-business owner’s lending finally matched their cash flow.
Try our extra repayments calculator while you’re thinking about it - sometimes the cheapest ‘refinance’ is keeping your loan and paying a little more into it each fortnight.
How I run a refinance review
Bring your latest statement - or just your questions. I’ll look at your rate, structure and fees, compare what’s genuinely available for your situation across lenders, and show you the break-even maths in plain numbers. If staying put is the right answer, I’ll tell you that. If switching is, I’ll handle the process end to end.
Either way, you’ll stop wondering whether you’re paying the loyalty tax. That alone is usually worth twenty minutes.
When did you last check your rate?
Book a free loan review - the answer is either peace of mind or money back in your pocket.