Is It Worth Refinancing Your Home Loan? 7 Signs It Might Be Time to Review Your Mortgage
- Steve Keramidas
- Aug 18
- 5 min read
If you’ve had your home loan for a few years, there’s a good chance your financial situation — and the home loan market — has changed since you originally took out your mortgage.
But does that mean you should refinance?
Not necessarily.
Refinancing can potentially reduce your interest costs, lower your repayments or give you access to loan features that better suit your circumstances. However, there are also costs involved in changing lenders, so the important question isn’t simply whether another lender has a lower interest rate.
The real question is: Will refinancing leave you better off?
Here are seven signs that it may be worth reviewing your current home loan.
1. Your Interest Rate Is No Longer Competitive
One of the most common reasons homeowners consider refinancing is to obtain a more competitive interest rate.
Even a relatively small difference in interest rate can become significant when applied to a large home loan over many years.
For example, if you have a substantial mortgage balance, reducing your interest rate may potentially save hundreds or even thousands of dollars each year.
That doesn’t automatically mean you should change lenders. Sometimes your existing lender may be prepared to offer you a better rate once your loan is reviewed.
This is why the first step should usually be comparing your current loan against what else is available.
2. Your Lender Won’t Give You a Better Deal
Many borrowers simply continue paying the rate offered by their lender without questioning whether it is still competitive.
If you have been making your repayments reliably and have built up equity in your property, it may be worth asking your existing lender to review your interest rate.
If they won’t provide a competitive offer, that may be a good reason to investigate other lenders.
Before refinancing, we generally look at whether staying with your existing lender makes sense as well. Changing banks isn't worthwhile simply for the sake of changing.
3. You're Paying Fees for Features You Don't Need
Some home loans come with annual package fees or monthly fees in exchange for features such as offset accounts, credit cards or packaged banking products.
Those features can be valuable — particularly an offset account when it is being used effectively.
But circumstances change.
If you're paying several hundred dollars each year for a package you no longer need, a simpler home loan with no ongoing fee may potentially be more suitable.
The interest rate is important, but it shouldn't be considered in isolation. The overall cost and features of the loan matter too.
4. Your Financial Circumstances Have Changed
The home loan that suited you five years ago may not necessarily be the loan that suits you today.
You may now:
earn a higher income;
have significantly more equity in your property;
have paid off other debts;
be planning renovations;
be considering purchasing an investment property;
want to restructure existing loans; or
simply want to repay your mortgage faster.
A home loan review isn't only about finding a lower rate. It is also an opportunity to make sure the structure of your lending still suits your current circumstances and future plans.
5. You've Built Up Significant Equity
If your property has increased in value while you've also been reducing your mortgage, your loan-to-value ratio (LVR) may be considerably lower than when you first borrowed.
That can be important.
Having more equity may provide access to different lending options or pricing than you qualified for previously.
Some homeowners may also want to access part of their available equity for purposes such as renovations, purchasing another property or other major expenses.
However, accessing equity means increasing your debt, so the purpose, repayments and longer-term implications should always be carefully considered.
6. You Want Different Home Loan Features
The cheapest interest rate isn't always the most suitable home loan.
Depending on your circumstances, you may value features such as:
an offset account;
additional repayments;
redraw;
multiple loan splits;
fixed and variable loan combinations; or
greater flexibility in how your loans are structured.
For example, someone who keeps substantial savings available may place greater value on an offset account than someone who maintains very little cash in their account.
The right loan should suit the way you actually manage your money.
7. Your Fixed Rate Is Coming to an End
If your fixed-rate period is approaching expiry, it is an ideal time to review your options.
When the fixed period ends, your loan will generally move onto the lender's applicable variable rate unless you make another arrangement.
Rather than simply accepting the new rate, it can be worthwhile reviewing what your existing lender can offer and comparing that against alternatives available elsewhere.
When Refinancing May NOT Be Worth It
This is just as important as understanding when refinancing can help.
A lower advertised interest rate doesn't automatically mean you should refinance.
Changing lenders can involve costs such as discharge fees, government mortgage registration fees, application or valuation costs and potentially other lender charges. Fixed-rate borrowers may also face break costs.
If you have limited equity, Lenders Mortgage Insurance (LMI) could also become a consideration.
That's why we look at the actual financial benefit after refinancing costs, rather than simply comparing two interest rates.
For example, imagine refinancing would save you $100 per month but cost approximately $2,000 to complete.
Your initial break-even period would be approximately 20 months.
If you were planning to sell the property six months later, refinancing may make little financial sense.
On the other hand, if the savings were substantial and you expected to keep the loan for many years, the numbers could look very different.
Be Careful About Restarting a 30-Year Loan
There's another refinancing trap that homeowners sometimes overlook.
Suppose you've already been paying your mortgage for eight years and have 22 years remaining.
If you refinance the remaining balance into a new 30-year loan, your required monthly repayment could fall — but you may end up paying the debt over a much longer period.
That could result in paying considerably more interest over the life of the loan.
When refinancing, it's therefore important to consider not only the interest rate and monthly repayment, but also the remaining loan term.
Should You Refinance?
There isn't one answer that applies to everyone.
For some homeowners, refinancing can produce worthwhile savings or provide a much better loan structure.
For others, the costs involved mean staying with their existing lender is the better option.
At Mortgage Compare Plus, we can review your current home loan, compare it against alternatives from a range of lenders and calculate whether there is a genuine financial benefit in refinancing.
And if your existing home loan is already competitive, we'll tell you that too.
Thinking about refinancing?
Contact Steve for a home loan review and find out whether your current mortgage is still competitive.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.
