When to Refinance & When Not to Refinance Your Home Loan

Refinancing your home loan makes sense when the financial benefit outweighs the cost and effort of switching lenders.

Most Richmond homeowners consider refinancing when their fixed rate period ends, when they spot a lower rate elsewhere, or when they need to access equity. But not every rate difference justifies the move, and not every circumstance suits a refinance. The decision comes down to your current loan terms, what you can access elsewhere, and what you're trying to achieve financially.

Your Fixed Rate Period Is Ending

When your fixed rate expires, you'll typically revert to your lender's standard variable rate, which is often higher than the rates offered to new customers. In our experience, many Richmond borrowers are unaware of this until the letter arrives, and by then they've already been moved onto the higher rate.

The month before your fixed rate ends is when you should start the refinance process. Consider a buyer who fixed a loan three years ago at 2.3% and is now facing reversion to a variable rate above 6%. Refinancing to a lender offering a rate in the low 6% range with an offset account can save several hundred dollars each month. The outcome depends on your loan amount, but for a $600,000 loan, the difference between a 6.5% standard variable and a 6.0% refinance rate is around $200 per month.

You're Paying a Higher Rate Than What's Available

If you've been with the same lender for more than two years without reviewing your loan, there's a strong chance you're paying more than you need to. Lenders regularly offer lower rates to attract new customers while existing customers drift upward on standard variable products.

A loan health check will show you where your rate sits compared to what's currently available. The general threshold for considering a refinance is a rate difference of 0.5% or more, though this depends on your loan balance and how long you intend to stay in the property. For someone in Richmond with a $500,000 loan and a rate that's 0.7% higher than current offerings, refinancing could reduce monthly repayments and provide access to features like offset accounts or redraw facilities that weren't included in the original loan.

You Need to Access Equity for Investment or Renovation

Refinancing to release equity is common among Richmond homeowners looking to fund a property purchase, renovation, or other investment. If your property has increased in value and you've paid down your loan, you may be able to access that equity by refinancing to release equity.

In a scenario like this, a Richmond homeowner with a property that has appreciated over several years might refinance to access $150,000 in equity for a deposit on an investment property. This is structured as a cash-out refinance, where the new loan amount is higher than the existing balance. The outcome is access to funds without needing to sell the property, though it does increase the overall loan balance and monthly repayments. It's worth running the numbers on whether the investment return justifies the additional borrowing cost.

When Not to Refinance Your Home Loan

Refinancing isn't always the right move, even if a lower rate is available. If you're planning to sell your Richmond property within the next 12 months, the cost of refinancing, including application fees, valuation fees, and potential discharge fees from your current lender, may not be recovered in the short time you remain in the property.

Similarly, if your current loan balance is below $200,000 and the rate difference is marginal, the savings may not justify the administrative effort. Fixed rate break costs are another consideration. If you're still within a fixed rate period and want to refinance early, your lender may charge a break cost that offsets any benefit from switching. You can estimate this using a fixed rate expiry calculator before proceeding.

You Want to Consolidate Debt Into Your Mortgage

If you're carrying high-interest debt such as credit cards or personal loans, refinancing to consolidate debt can reduce your overall interest burden and improve cashflow. This works by rolling your unsecured debts into your home loan, which typically has a much lower rate.

As an example, a Richmond homeowner with $30,000 in credit card debt at 20% interest and a mortgage at 6% could refinance to consolidate both into a single loan. The monthly repayment on the credit card alone would be over $600 just to cover interest, whereas consolidating that debt into the mortgage brings the cost down significantly. The trade-off is that you're now paying off that debt over the life of the home loan unless you make additional repayments, so it requires discipline to avoid re-accumulating debt on the cards.

Your Loan No Longer Suits Your Financial Situation

Your circumstances may have changed since you first took out your home loan. If you're now self-employed, earning a higher income, or planning to expand your property portfolio, your current loan structure may not support your goals.

Refinancing allows you to adjust your loan type, add features like offset accounts, or switch from principal and interest to interest-only repayments if you're holding an investment property. Richmond clients who have transitioned from employment to running their own business often find that their original loan doesn't reflect their current financial position, and refinancing with updated documentation can unlock lower rates or higher borrowing capacity for future investments. You can explore whether expanding your property portfolio is viable by reviewing your equity position and borrowing capacity during the refinance process.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare what's available across multiple lenders, and walk you through whether refinancing makes sense for your situation.

Frequently Asked Questions