When to Refinance and What It Actually Costs

Refinancing works when the numbers justify the effort.

Refinancing makes sense when the financial benefit exceeds the cost of switching lenders, or when you need to access equity for a specific wealth-building purpose. Most New Farm residents refinance for one of four reasons: their fixed rate period has ended and they're moving to a higher revert rate, they need to access equity for an investment property deposit, their current loan lacks features like an offset account that would improve cashflow, or they're consolidating debt to reduce monthly commitments. Each scenario has different timing considerations and different costs attached.

When Your Fixed Rate Period Ends

The revert rate is typically 0.5% to 1.0% higher than the current variable or fixed rates available to new borrowers. If your fixed rate is expiring and your lender's revert rate is materially higher than what you could access by switching, refinancing becomes a cashflow decision. Consider a borrower with a loan amount of $600,000 coming off a fixed rate. If the revert rate is 6.5% and a new variable rate through refinancing is 5.8%, that difference saves around $350 per month. Over 12 months, that's $4,200 in reduced interest costs. The refinancing process typically takes four to six weeks, so starting the conversation three months before your fixed rate expiry gives you time to compare options without rushing.

Refinancing isn't always the answer when a fixed rate period ends. Some lenders offer retention rates to existing customers that sit close to their new customer rates. If your current lender offers a rate within 0.2% of what you'd get by switching, and your loan already has the features you need, staying put avoids application fees, valuation costs, and the time involved in a full refinance application.

Accessing Equity for Investment Property Purchases

New Farm properties have built considerable equity over the last decade, and many residents hold substantial wealth in their homes without realising how it can be deployed. Releasing equity through refinancing allows you to use that value as a deposit for an investment property without selling your current home. Lenders typically allow you to borrow up to 80% of your property's current value without requiring lenders mortgage insurance. If your current loan sits at 50% of your property's valuation, you may have access to 30% of that value as usable equity.

In a scenario where a New Farm property is valued at $1.2 million and the existing loan amount is $600,000, the borrower has $600,000 in equity. At 80% lending, they could borrow up to $960,000, which means they can access up to $360,000 in additional funds. That's enough for a 20% deposit on an investment property valued at $700,000, plus costs. The refinance process here involves a new property valuation, updated income verification, and a formal application with a lender that offers competitive investment loan structures. Timing matters because you need the equity release settled before you make an offer on the investment property, so starting the refinance application before you begin your property search keeps your options open.

Improving Loan Features Without Increasing Costs

Offset accounts and redraw facilities both allow you to reduce interest costs, but they work differently. An offset account is a transaction account linked to your home loan. Every dollar in the offset reduces the balance on which interest is calculated. If you have a loan amount of $500,000 and $50,000 sitting in an offset account, you only pay interest on $450,000. Redraw lets you withdraw extra repayments you've made, but it doesn't reduce your daily interest calculation unless you've actually paid down the loan balance.

Some lenders charge monthly fees for offset accounts, others include them at no cost. If your current loan doesn't offer an offset and you typically hold $20,000 to $40,000 in savings, refinancing to a loan with a no-fee offset can improve cashflow without changing your interest rate. For a New Farm household with variable income from consulting work or business ownership, an offset account turns surplus cash into immediate interest savings without locking funds away. A loan health check identifies whether your current loan structure matches how you actually manage money, or whether you're paying more interest than necessary because your loan lacks the right features.

Consolidating Debt Into Your Mortgage

Consolidating personal loans, car loans, or credit card balances into your mortgage reduces your monthly commitments by replacing high-interest debt with a lower interest rate secured against your property. A $30,000 car loan at 8.5% and a $15,000 personal loan at 11% cost around $900 per month combined. Rolling that $45,000 into a mortgage at 5.8% reduces the monthly cost to around $270, which frees up $630 per month in cashflow. The trade-off is that you're extending the repayment term from three to five years out to the remaining term of your mortgage, which means you pay more interest over time unless you make extra repayments to clear the consolidated amount quickly.

This approach works when the immediate cashflow improvement allows you to redirect income toward wealth-building activities, such as increasing superannuation contributions or building an investment deposit. It doesn't work if the lower monthly commitment simply funds lifestyle spending without improving your financial position. Lenders assess your capacity to service the higher loan amount, so consolidating debt through refinancing requires stable income and a property valuation that supports the increased borrowing.

When Refinancing Wastes Money Instead of Saving It

Refinancing costs between $1,500 and $3,000 when you include application fees, valuation fees, discharge fees from your current lender, and settlement costs. If the interest rate saving is less than 0.3% and your loan amount is under $400,000, the cost of refinancing can take two years or more to recover. A $300,000 loan moving from 6.0% to 5.7% saves around $75 per month. After refinancing costs of $2,000, it takes more than two years just to break even. If you plan to sell the property or pay off the loan within that timeframe, refinancing doesn't deliver a financial benefit.

Refinancing also disrupts your ability to borrow for other purposes in the short term. Most lenders want to see at least three months of repayment history on a new loan before they'll consider another application. If you're planning to buy an investment property, upgrade your home, or access equity for another purpose within the next six months, refinancing now may limit your options later. A mortgage broker can model whether refinancing today or holding off until after your next purchase delivers the most value over the next 12 to 24 months.

Call one of our team or book an appointment at a time that works for you to review your current loan structure and work out whether refinancing improves your position or just adds cost without return.

Frequently Asked Questions