When Should I Refinance My Home Loan? — 2026 Guide
Refinancing at the right time can save tens of thousands of dollars. But refinancing at the wrong time can cost you. Here's a clear framework for deciding whether it's worth switching lenders — including the break-even calculation most people miss.
Signs It's Time to Refinance
- Your rate is 0.5% or more above the best available rate — the savings quickly outpace switching costs
- You're coming off a fixed rate in 1–3 months — start shopping now before you roll to the revert rate
- Your property has increased in value — higher equity = better LVR = better rates
- Your income or credit profile has improved — you may now qualify for lenders who rejected you before
- You want features your current loan lacks — offset account, redraw, portability
- Your fixed term is ending — the revert rate is almost always uncompetitive
The Break-Even Calculation
Before refinancing, calculate how long it takes for your savings to exceed your switching costs.
| Item | Typical Cost |
|---|---|
| Discharge fee (old lender) | $150–$400 |
| Break costs (if breaking fixed rate) | $0–$50,000+ |
| New loan establishment/application fee | $0–$600 |
| Valuation fee | $0–$600 |
| New mortgage registration | $150–$300 |
| LMI (if LVR now exceeds 80%) | $0–$25,000+ |
| Typical total switching cost | $800–$2,000 (no fixed break) |
Switching saves 0.5% on a $550,000 loan = $2,750/year saved. Switching costs $1,500 total. Break-even: 7 months. After that, you're ahead $2,750/year for the life of the loan. Over 5 years: $12,250 savings net of costs. Refinancing is almost always worth it when you can save 0.5%+ with no fixed break costs.
Mortgage Cashback Offers — Are They Worth It?
Many lenders offer $2,000–$4,000 cashback to attract refinancers. These can be genuinely valuable — but watch the rate. A $3,000 cashback with a rate 0.3% higher than the best available costs you $1,650/year more in interest on a $550,000 loan. Within 2 years, you're behind. Always prioritise rate over cashback for long-term loans.
When NOT to Refinance
- You're in the early years of a fixed loan with large break costs
- Your LVR has risen above 80% (falling property prices) — you may need to pay LMI again
- You plan to sell within 12–18 months — switching costs won't break even
- Your financial situation has deteriorated — approval may be harder and at worse rates
- The rate saving is less than 0.3% on a small remaining loan balance
How to Refinance — Step by Step
- Check your current rate — call your lender and ask what rate you're on today
- Compare market rates — use a comparison site or broker to find best available
- Calculate break-even — switching costs ÷ annual savings = months to break even
- Apply for pre-approval — gather payslips, tax returns, bank statements
- Request discharge from old lender — they have 10 business days to comply
- New loan settles — your old loan is paid out and new loan begins
Calculate Your Refinancing Savings
Our mortgage calculator lets you compare repayments at your current rate vs a lower rate to see exactly how much you'd save.
Compare Repayments →Extra Repayment Savings →Offset Savings →Related Mortgage Calculators
Compare your current rate with a lower rate, test extra repayment savings and model offset account benefits before refinancing.
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