Is Now the Right Time to Refinance Your Home Loan?
October 18, 2025 • 6 min read
If you've had your home loan for more than 2 years, there's a good chance you're paying too much. The average Australian could save $3,000-$5,000 per year by refinancing to a better rate - but timing and circumstances matter. Here's how to know if now is the right time for you.
Quick Refinance Savings Calculator
See Your Potential Savings
Current Loan: $500,000 @ 6.5%
Monthly repayment: $3,160
Refinanced: $500,000 @ 5.9%
Monthly repayment: $2,963
Save $197/month
$2,364 per year • $70,920 over 30 years
Even a 0.6% rate reduction can save you tens of thousands over the life of your loan.
7 Signs It's Time to Refinance
1. Your Rate is Above Market Average
If you're paying more than 6.2% (as of October 2025), you're likely overpaying. New customer rates from online lenders start from 5.79%.
2. You've Had Your Loan for 2+ Years
Banks typically offer the best rates to new customers. If you've been with the same lender for years, you're probably paying a "loyalty tax" - higher rates than new borrowers.
3. Your LVR Has Dropped Below 80%
If you've paid down your loan or your property has increased in value, you might now have more than 20% equity. This can qualify you for better rates and unlock offset accounts.
Example: Bought for $600k with $60k deposit (90% LVR). Property now worth $700k, loan is $510k = 73% LVR. You now qualify for better rates!
4. Your Fixed Rate is About to Expire
Many borrowers who fixed at 2-3% during 2020-2021 are now rolling onto variable rates of 6%+. This is the PERFECT time to shop around rather than accept your lender's revert rate.
5. You Want Better Loan Features
Your current loan might lack an offset account, redraw facility, or ability to make extra repayments. Refinancing can get you better features that save money.
6. You Need to Access Equity
Renovating? Buying an investment property? Refinancing can let you access your built-up equity at better rates than a personal loan or credit card.
7. You Have Multiple Debts to Consolidate
Credit cards at 20%, car loans at 10%, personal loans at 12%. Consolidating these into your home loan at 6% could save thousands per month.
Warning: Only do this if you commit to not running up the credit cards again!
When NOT to Refinance
Refinancing isn't always the right move. Avoid refinancing if:
- You're planning to sell within 1-2 years: Refinance costs ($1,000-$3,000) won't be recouped in time
- Your break costs are too high: Exiting a fixed loan early can cost $5,000-$20,000+
- Your loan is very small: Under $150,000, the savings may not justify the effort
- Your credit score has deteriorated: You might not qualify for better rates anymore
- You'll extend your loan term: Refinancing to a new 30-year loan when you had 15 years left means more total interest paid
The Refinancing Process: Timeline
Compare & Apply (1-2 days)
Research lenders, compare rates and features, submit application
Assessment & Valuation (1-2 weeks)
Lender reviews application, orders property valuation
Approval (1 week)
Conditional approval, then formal approval once conditions met
Settlement (1-2 weeks)
Sign documents, new lender pays out old loan, start saving!
Total timeline: 4-6 weeks from application to settlement
Costs to Consider
Typical refinancing costs:
- Application fee: $0-$600
- Valuation fee: $0-$300 (often waived)
- Settlement fee: $0-$300
- Discharge fee from old lender: $300-$500
- Government charges: $50-$200
Total typical cost: $1,000-$2,500
But if you save $200/month, you break even in 5-12 months!
The Bottom Line
For most Australians with home loans over $250,000 who've had their loan for 2+ years, refinancing is likely to save money. The key questions are:
- Can I get a rate at least 0.3% lower? (Makes refinancing worthwhile)
- Will I recoup the costs within 12 months? (Check your savings calculator)
- Am I getting better features, not just a lower rate? (Offset, flexibility, etc.)
If you answered yes to these questions, now is probably a good time to refinance.
See How Much You Could Save
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