Unlock the secrets to refinancing for a lower rate

Is refinancing to a lower rate actually worth it?

Yes, if your current rate sits more than 0.3% above what you could access today, refinancing typically delivers measurable savings even after accounting for costs. The decision hinges on how long you plan to stay in the loan and whether your property value supports a smooth switch.

Consider a homeowner in Bulimba with $500,000 remaining on their mortgage at a variable rate that hasn't moved since they locked it in three years ago. Their lender never adjusted their rate downward when market rates shifted, so they're now paying 0.6% more than they could access elsewhere. Over a 25-year term, that difference costs them roughly $50,000 in additional interest. Refinancing to reduce that rate means the savings begin immediately, cutting monthly repayments by around $170 and freeing up cash for other priorities.

The key consideration isn't just the advertised rate. Lenders use comparison rates to show the true cost of a loan, including most fees. A rate that looks attractive on the surface might carry higher ongoing costs, so the comparison rate gives you a clearer picture of what you'll actually pay over time.

How to know if your current rate is too high

Your rate is too high if it sits above the current market range for your loan type and deposit size, which you can confirm by comparing at least three offers from different lenders.

Most borrowers assume their lender will automatically adjust their rate to stay competitive, but that's rarely how it works. Lenders often increase rates quickly when funding costs rise but don't always drop them when conditions improve. If you've been on the same variable rate for more than two years without a reduction, there's a strong chance you're paying more than you need to.

Bulimba's housing market, with its mix of character homes and riverside properties, means property values have generally held firm. That stability works in your favour when refinancing because lenders assess your loan-to-value ratio (LVR) based on your current property value. If your property has increased in value since you bought it, your LVR improves, which can unlock access to lower rates without needing to contribute additional equity.

What refinancing actually costs

Refinancing typically involves discharge fees from your current lender, application fees with the new lender, and valuation costs, usually totalling between $500 and $1,500 depending on your loan size and lender.

Discharge fees cover the administrative cost of closing your existing loan and usually sit between $300 and $400. Application fees vary widely. Some lenders waive them entirely to attract refinancing customers, while others charge up to $600. A valuation might cost another $200 to $300, though some lenders cover this if you're borrowing above a certain amount.

If you're leaving a fixed rate loan before the term ends, break costs can add thousands to the process. These costs reflect the lender's loss when you exit a fixed rate contract early, calculated based on the difference between your fixed rate and the current wholesale rate. If rates have dropped since you fixed, break costs can be significant. If rates have risen, break costs might be zero. It's worth checking your fixed rate expiry date before making any decisions.

Most of these costs can be rolled into your new loan, so you won't need cash upfront. The question is whether the savings outweigh the costs over the time you plan to hold the loan. In most cases, if you're saving more than 0.3% on your rate and staying in the loan for at least two years, refinancing pays for itself.

How to compare rates without getting lost

Start by identifying your current rate, your loan balance, and your property's approximate value. Then request rate quotes from at least three lenders based on those figures.

Rate shopping can feel overwhelming because every lender presents their offers differently. Some lead with an introductory rate that only lasts 12 months, then reverts to a higher ongoing rate. Others advertise a low rate but tie it to conditions like offset accounts you won't use or minimum deposit sizes you don't meet.

A mortgage broker can pull offers from multiple lenders at once and present them in a way that makes the real differences clear. We regularly see Bulimba clients who've spent weeks comparing rates online, only to realise the loan they were about to apply for carried restrictions that didn't suit their situation. Brokers also have access to rates that aren't advertised publicly, particularly for borrowers with strong equity or stable income.

Don't ignore the features of the loan when comparing. A rate that's 0.1% lower but lacks an offset account might cost you more if you usually keep a buffer in your account. Similarly, a loan with limited extra repayment options won't suit someone planning to make lump sum payments when they receive bonuses or tax returns.

When refinancing doesn't make sense

Refinancing doesn't make sense if you're planning to sell within 12 months, if your property value has dropped significantly, or if your income or credit situation has changed in a way that limits your options.

Some homeowners assume refinancing is always the answer to reducing costs, but timing matters. If you're close to paying off your loan, the savings from a lower rate might not justify the application effort and upfront costs. Similarly, if you've recently refinanced and your rate is already competitive, switching again won't deliver much benefit.

Property values play a larger role than most people expect. If your home's value has declined or remained flat while you've made only minimal repayments, your LVR might have increased. A higher LVR can push you into a different pricing tier, meaning the rate you're offered now might not be any lower than what you're already paying. In Bulimba, this is less common given the suburb's consistent demand and proximity to the CBD, but it's still worth confirming your property's current value before applying.

Changes to your employment or credit file can also affect the outcome. Lenders assess your income and liabilities at the time of application, so if you've reduced your hours, switched to contract work, or taken on new debts, the rate you're offered might not reflect the advertised figures. A loan health check can flag these issues before you apply.

How long refinancing takes

Refinancing usually takes between three and six weeks from application to settlement, depending on how quickly you provide documents and how busy the lender is.

The process starts with a formal application, which includes submitting proof of income, bank statements, and a property valuation. Once the lender reviews your application and values your property, they issue a formal approval. From there, you'll sign loan documents, and the new lender will arrange settlement with your current lender.

Delays usually happen when documents are incomplete or when the valuation comes back lower than expected. Lenders often request additional statements or clarification on specific transactions, particularly if you're self-employed or have irregular income. Having your documents organised upfront speeds up the process significantly.

If you're refinancing to lock in a rate before it changes, timing becomes more important. Rates can shift between application and settlement, so some lenders offer rate locks that guarantee your rate for a set period, usually 90 days. This removes the risk of the rate increasing while your application is being processed.

What happens after you switch lenders

Once your new loan settles, your old loan is discharged, your repayments move to the new lender, and any linked accounts like offset accounts transfer across or need to be set up again.

You'll need to update your direct debit details so repayments come out of the right account. If you had an offset account with your previous lender, you'll either need to transfer that balance to a new offset account or adjust how you manage your savings. Some clients prefer to keep their offset with the new lender, while others consolidate their accounts elsewhere depending on the features offered.

If your loan was linked to a redraw facility and you'd made extra repayments, those funds are usually transferred into your new loan during settlement. That means your new loan balance reflects the amount you owed after accounting for any additional payments you'd made. Some lenders offer more flexible redraw conditions than others, so it's worth checking how that works with your new lender.

You won't need to notify your insurance company or make any changes to your property title. The refinance only affects your mortgage, not your ownership or any other obligations tied to the property.

Call one of our team or book an appointment at a time that works for you.

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