When Should I Refinance?
The Quick Answer:
Refinancing is usually worth a look when your rate sits well above what new customers are being offered, your fixed rate is about to end, or your equity has grown past 20%.
As I'm sure you know, 2026 has been a relentless year of rate rises. The RBA lifted the cash rate by a cumulative 75 basis points this year before pausing in August, and most borrowers have felt that in their monthly repayments.
When rates go up, the instinct is to sit tight and wait it out. But a rising market is exactly when the gap between a good deal and an average one gets expensive.
Lenders compete hard for new customers. Existing ones often just get the rate rise passed on, with no discount to soften it.
A home loan isn't a set-and-forget product. Here's how to work out whether yours still deserves a place in your budget.
How do I know if I'm paying a "loyalty tax"?
The loyalty tax is the gap between what your lender charges you and what it offers someone walking in the door today.
This isn't a conspiracy theory. The ACCC's Home Loan Price Inquiry found existing bank customers tend to pay more for their loans than new customers, and the gap widens the longer you stay. As at September 2020, borrowers with loans between three and five years old were paying 0.58% more on average, rising to 1.04% for loans older than ten years.
The ACCC even recommended lenders be required to give borrowers with variable loans three or more years old an annual prompt to check whether they could benefit from switching.
A quick self-check:
Find your current rate on your latest statement or banking app
Compare it to the rates your own lender advertises to new customers
If the gap is 0.5% or more, it's worth a conversation
Six signs it's time for a rate review:
Your fixed rate ends in the next three months. When a fixed term expires, most loans roll onto the lender's standard variable rate, which is rarely its sharpest. This is the single best moment to shop around, because there are no break costs.
You haven't reviewed your loan in two years or more. Time alone tends to push you further from the best rates on offer.
Your equity has grown past 20%. Repayments and price growth both lower your loan-to-value ratio (LVR). Lower LVR usually means sharper pricing.
Your income has changed. A pay rise, a stable new job or two years of self-employed tax returns can open up lenders that weren't available to you before.
You're paying for features you don't use. Package fees or an offset account sitting at zero are costs worth questioning.
You want to change your loan structure. Splitting fixed and variable, adding an offset, or consolidating debts can all be reasons to refinance beyond the rate itself.
What will refinancing actually cost me?
Switching costs are real, but they're usually smaller than people fear. Moneysmart identifies fixed-rate break costs, discharge fees, new application fees, internal switching fees, possible mortgage duty and LMI as the items that can affect whether switching is worthwhile.
Typical costs to budget for:
A discharge fee from your current lender
State government registration and discharge fees
Application, settlement and valuation fees with the new lender (often waived for refinancers)
LMI, if your new loan will be above 80% LVR
A 2026 twist on break costs. If you're on a fixed rate and thinking of leaving early, the direction of rates matters. When wholesale rates have risen since you fixed, the lender can re-lend your money at a higher rate, so there's usually little or no loss to recover and the break cost is often nil or close to it. That's very different to the cutting years, when break costs could hit five figures. Always get a written quote from your lender before assuming either way.
How do I work out if it's worth it?
Use the break-even test:
Total switching costs ÷ monthly saving = months to break even
Here's an illustrative example. Say you have $600,000 owing with 25 years left:
At 6.60%, repayments are about $4,089 a month
At 6.00%, repayments are about $3,866 a month
That's roughly $223 a month, or around $2,670 a year
If switching costs $1,500, you'd break even in about seven months. Everything after that is money back in your pocket.
One trap to avoid: if you do switch, be firm on the loan length you want, or you could end up with a longer term than the years left on your current mortgage. Resetting 25 years back to 30 lowers the repayment but can cost you more interest overall. moneysmart
Moneysmart also has a free mortgage switching calculator that shows how long it will take to recover the cost of switching.
When should I stay put?
Sometimes the best outcome of a review is confirming you're already in a good spot. Staying put can make sense when:
Your equity is under 20%. Paying LMI a second time can wipe out years of savings.
Your borrowing capacity has tightened. Any new lender will reassess you from scratch. APRA requires banks and most non-bank lenders to stress-test applications at your contracted rate plus three percentage points, so after this year's rises some borrowers may not qualify for the same loan elsewhere, even if they've never missed a repayment. Mozo
Your loan balance is small. Flat fees hit harder when the saving is only a few dollars a month.
Your current lender matches the offer. ASIC's advice is that the first step is asking your current lender for a better deal, since new customers are often offered better rates than existing borrowers.
Frequently asked questions:
Can I refinance if rates are expected to rise?
Yes. Rate rises generally flow through to most variable loans, so what matters is the gap between your rate and the market. A lower starting rate still keeps you ahead after any rise.
How long does refinancing take?
It varies by lender and how complex your situation is, but a straightforward refinance commonly takes a few weeks from application to settlement. A broker can manage the paperwork and the discharge process for you.
Will refinancing hurt my credit score?
A new application creates a credit enquiry, but one well-timed refinance is unlikely to cause lasting problems. Multiple applications close together are the thing to avoid.
Does a cashback offer make a loan the best deal?
Not on its own. ASIC recommends doing the maths to make sure a cashback still puts you ahead over the long term once interest rates and fees are counted
Find a broker who knows refinancing
A good broker compares loans across a panel of lenders, runs your break-even numbers, and tells you honestly when staying put is the better call. ASIC also suggests asking any broker how they're paid, and the right one will answer that openly.
Keen to know more? Book a chat with Eshanee from April Six by clicking here.
*Any information or advice contained in sidering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.
April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253 | Credit Representative Number 554762.*
Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.