Proven Tips to Know When Refinancing Actually Saves You Money

Refinancing works when the financial benefit outweighs the cost and effort.

That calculation changes depending on your loan size, how long you plan to stay in the property, and what you're trying to achieve. A borrower in Malvern East with a $900,000 mortgage who refinances to shave 0.40% off their rate will recover application costs within four months. Someone with a $400,000 loan and only 0.15% rate difference might take two years to break even.

Your Fixed Rate Period Is Ending

You're about to revert to a variable rate that's typically 1.5% to 2% higher than what new borrowers are currently offered.

Lenders price fixed rate expiry customers on retention, not acquisition. They know most borrowers will stay put unless prompted. In our experience, someone coming off a fixed rate in Malvern East who doesn't act will often land on a rate that's 1.8% to 2.2% higher than what they could secure with another lender. Over a $750,000 loan, that difference costs around $1,100 to $1,375 extra each month. You should start a home loan health check around 90 days before your fixed term ends, not after you've already reverted.

Consider a borrower who fixed at 2.19% three years ago and is now reverting to 6.5%. That same borrower could refinance to a variable rate around 5.8% to 6.1%, depending on their loan amount and deposit position. The application takes four to six weeks, so timing matters.

You're Paying More Than 0.30% Above Current Rates

If your current variable interest rate sits more than 0.30% above what similar borrowers are being offered, refinancing will likely pay for itself within the first year.

Mortgage refinancing costs typically include application fees, valuation fees, and discharge fees from your existing lender. Across most lenders, these total between $800 and $1,400. On a loan amount of $600,000, a 0.40% rate reduction saves roughly $200 per month, which means you recover costs in six to seven months. After that, the saving continues for as long as you hold the loan. If you're stuck on a high rate because you haven't reviewed your loan in three or four years, you're likely paying several hundred dollars more each month than necessary.

You Need to Access Equity for Investment or Renovation

Releasing equity in your property through a refinance lets you borrow against the value your home has gained without selling it.

Malvern East has seen consistent capital growth over the past decade, and many properties purchased five or more years ago now carry substantial equity. If you're looking to access equity for an investment property deposit, renovation, or debt consolidation, a cash out refinance lets you increase your loan amount and withdraw the difference. Lenders will typically allow you to borrow up to 80% of your property's current value without paying lender's mortgage insurance, though a property valuation will be required as part of the refinance process.

As an example, a borrower who purchased in Malvern East several years ago for $850,000 may now own a property valued at $1.1 million. With an outstanding loan of $600,000, they hold around $500,000 in equity. They could refinance to release equity and borrow up to $880,000 (80% of the current value), unlocking $280,000 for their next purchase. The refinance application takes four to six weeks, and the funds are available at settlement.

Your Current Loan Lacks an Offset Account or Redraw Flexibility

If your mortgage doesn't include an offset account and you're holding savings in a separate transaction account, you're paying interest on money you already have.

An offset account sits alongside your home loan and reduces the balance on which interest is calculated. For someone with a $700,000 mortgage and $50,000 in savings, an offset account saves around $250 to $300 per month in interest, depending on the current variable interest rate. Not all loans include this feature, particularly older products or fixed rate loans. If you're coming off a fixed rate period or you've been with the same lender for several years, your loan may not offer offset access. Refinancing to a loan with an offset account improves cashflow and reduces the total interest you pay over the life of the loan.

Some loans also restrict redraw or charge fees to access extra repayments. If your current loan penalises you for getting ahead, switching to a loan with flexible redraw and no ongoing fees makes financial sense, particularly if you make irregular lump sum payments throughout the year.

When Refinancing Doesn't Make Sense

Refinancing costs money and takes time, so it's not always the right move.

If your loan balance is below $200,000 and you only plan to stay in the property for another year or two, the saving from a lower interest rate may not justify the effort. Similarly, if you're within 18 months of paying off your mortgage entirely, the total interest saved will be minimal. You should also factor in whether your current lender is willing to negotiate. In some cases, a loan review with your existing lender can secure a rate reduction without the need to move. That said, retention discounts are typically smaller than what you'd access through a full refinance, and they're often temporary.

If you're planning to sell within the next 12 months, refinancing rarely makes sense unless you're also releasing equity or consolidating debt. The break-even point on most refinances is six to twelve months, depending on your loan size and rate improvement.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on your current loan, show you what's available, and let you know whether refinancing delivers a genuine saving or whether you're already in a solid position.

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