When Should You Refinance Your Home Loan, and How Do You Compare Options?

Refinancing a home loan isn’t just about grabbing the lowest advertised rate—it’s about working out whether the long‑term interest savings outweigh the upfront and ongoing costs, and whether the new loan suits your needs.

The most common time to consider refinancing is when your fixed‑rate period draws to a close and the rate is about to revert to a higher variable rate. It can also be worth checking the market when variable rate spreads widen. According to MoneySmart, there can be an interest‑rate difference of more than 2% between variable home loans on the market, so checking what’s available from time to time is a sensible habit.

Start with your current lender

Before paying exit fees, it’s worth asking your current lender for a better deal. If you’ve built at least 20% equity in your home and kept a clean repayment history, you’re in a stronger bargaining position. The rate your current lender offers should then be compared with other loans you’re considering, not accepted on its own.

Compare the real cost, not just the rate

A lower headline rate can be deceptive once you add the fees that come with switching. MoneySmart’s switching‑home‑loans page describes the charges to watch for:

• Fixed‑rate break fee – This can be large if you exit a fixed‑rate loan early.
• Discharge (termination) fee – Payable when you close your current loan.
• Application fee – An upfront fee for the new loan.
• Switching fee – Charged if you stay with the same lender but move to a different product.
• Stamp duty – You may be liable for stamp duty when refinancing; check with the lender.

If your equity is below 20%, you might also have to pay lender’s mortgage insurance (LMI) again, which can wipe out the rate gain. In that situation, ask whether you can get a partial refund of the LMI from your existing loan.

Keep the loan term short enough

When you take out a new loan, the default term is often 25 or 30 years. If you only have 20 years left on your current loan, resetting the clock means more interest over the life of the loan, even if the monthly repayment drops. Negotiate a term close to the years remaining on your current mortgage.

Use calculators to model the break‑even point

MoneySmart’s mortgage switching calculator helps you work out when the monthly savings cover the upfront costs. OzLoan also offers a Refinance Break‑Even Calculator that compares your current and new rates, subtracts switching fees, and shows the net saving over the remaining term. These tools can help you see whether a deal that looks good on paper actually pays off.

A simple example from MoneySmart illustrates the idea: after their fixed rate ended, Simon and Tiana found two loans with lower interest rates. One charged a $600 application fee, the other $300. Because the first loan’s lower rate more than offset the higher fee, they forecast a saving of over $84,000 across 25 years, with the switching costs recovered in five months.

Where to compare refinance options

Once you’ve checked with your current lender, you can look at what other lenders offer through licensed mortgage brokers, lender websites, and general‑information research sites like OzLoan. Comparison websites can be a helpful starting point, but they are businesses that may receive promoted-link fees and may not cover every option on the market.

What OzLoan offers on this topic

OzLoan is an independent research and comparison‑led publication. The site provides guides, rate and policy updates, and free calculators that let you model repayments, refinance break‑even, offset savings and more. It also accepts service enquiries for Australian loan assistance within the scope of an authorised credit representative. OzLoan is not a lender—it does not promise approval, a particular interest rate, or guaranteed savings—and it does not give personal financial advice.

The calculators are free to use, with no sign‑up required. You can model scenarios at your own pace and then decide whether to take the next step.

When refinancing may not be right for you

• Your break fee or exit costs are larger than the interest saving over a sensible time horizon.
• Your equity is below 20% and you would pay LMI again with little prospect of a refund.
• You’re planning to sell within a year or two—the upfront fees may never be recovered.

If you’re struggling with repayments, the priority is different. MoneySmart advises talking to your lender early and getting free legal advice if you’ve received a default notice.

The key takeaway

Refinancing can be a worthwhile exercise when the numbers stack up. Compare the interest saving, add up every switching cost, keep the loan term short, and use a break‑even calculation to see how long the payback really takes. Starting with your current lender can be the simplest move, but keeping an eye on the wider market—with the help of independent research and calculators—gives you the full picture before you commit.