Refinance Fixed Loan? Here's How to Gain Control

Are you feeling the pinch of your current fixed-rate mortgage, wishing you could tap into more favourable interest rates or reduce your monthly repayments? Refinancing a fixed loan can seem daunting, but with the right guidance and understanding, it can be a strategic move to improve your financial situation.

Understanding Refinancing a Fixed Loan

Refinancing a fixed loan involves taking out a new loan to pay off your existing mortgage, ideally at a lower interest rate or with better terms. The goal is to lower your monthly payments, reduce the total interest paid over the life of the loan, or access equity for other financial needs. However, when your current loan is fixed, there are additional considerations, such as break costs and timing, which can impact your decision.

Current Rates, Requirements, and Options

As of 2026, Australian interest rates have stabilised, with fixed home loan rates typically ranging from 6.49% to 12%. Variable rates, in comparison, often offer more flexibility and can be lower, depending on market conditions. If you're considering refinancing your fixed loan, you'll need to weigh the potential savings against any exit fees or break costs associated with your current loan.

Eligibility criteria for refinancing generally include a stable income, a credit score of at least 620, and a loan-to-value ratio (LVR) under 80%. However, each lender has unique requirements, and working with a mortgage broker like Esteb and Co can help you navigate these complexities with access to over 83 lenders.

Steps to Refinance Your Fixed Loan

Refinancing a fixed loan involves several steps, each crucial to ensuring you make the best decision for your circumstances:

1. Assess Your Current Loan: Review your loan terms, including interest rate, remaining balance, and any break costs or exit fees.
2. Determine Your Goals: Decide whether your priority is lowering monthly payments, reducing overall interest, or accessing equity.
3. Research Alternatives: Compare current loan options available through Esteb and Co's extensive panel of lenders, focusing on rates and terms that align with your goals.
4. Calculate Potential Savings: Use an online refinancing calculator to estimate your savings, factoring in both new loan terms and any fees associated with breaking your current fixed loan.
5. Apply for Pre-Approval: Submit your application to the chosen lender to secure pre-approval, giving you confidence in the refinancing process.
6. Consult with a Broker: Work with a mortgage broker to finalise your options and manage the transition to your new loan.
7. Complete the Transition: Once approved, your new lender will pay off your existing loan, and you’ll start repayments on your new mortgage.

Expert Tips and Considerations

Refinancing a fixed loan can be advantageous, but it requires careful consideration. Here are some expert tips to guide you:

• Evaluate Break Costs: Break costs can be significant, especially if rates have fallen since you took out your fixed loan. Make sure these are outweighed by your potential savings.
• Consider Timing: Timing your refinance near the end of your fixed term can minimise break costs, providing a smoother transition.
• Fixed vs. Variable: If you prefer stable payments, another fixed loan might suit you. However, if you anticipate rate drops, a variable or split loan could be more beneficial.
• Use Professional Help: A broker can provide insights and access to a broad range of lenders, simplifying the process.
• Revisit Your Finances: Ensure your financial situation supports refinancing, with adequate income and credit standing.

Frequently Asked Questions

1. Can I refinance a fixed-rate loan before the term ends?
   Yes, but you may incur break costs. It's important to calculate if the savings outweigh these fees.
2. What are break costs?
   Break costs are fees charged by lenders when you pay off a fixed-rate loan early, compensating them for potential interest losses.
3. How do I know if refinancing is right for me?
   Consider your financial goals, current interest rates, and potential savings versus costs. Consulting with a mortgage broker can provide clarity.
4. What are the common eligibility criteria for refinancing?
   Stable income, a good credit score, and a favourable loan-to-value ratio are commonly required.
5. How long does the refinancing process take?
   It typically takes 4-6 weeks, depending on the lender and your financial situation.
6. Can I negotiate break costs?
   While break costs are generally fixed, discussing your situation with your lender may offer some flexibility.
7. How can Esteb and Co help with refinancing?
   We offer access to over 83 lenders, providing a wide range of options to suit your needs and expert guidance throughout the process.