Refinancing is one of those things that sounds like it should be straightforward — swap your old loan for a better one and save money. And sometimes it really is that simple. But other times, the costs involved can eat into the savings, or the timing just isn't right.

Here's an honest look at when refinancing makes sense, when it probably doesn't, and what the process actually involves.

What Is Refinancing, Exactly?

Refinancing means replacing your current home loan with a new one — either with a different lender or sometimes with the same lender on different terms. People refinance for all sorts of reasons, but the most common ones come down to money: getting a lower rate, reducing repayments, or accessing equity.

When Refinancing Usually Makes Sense

Your Interest Rate Has Crept Up

If you've been on the same loan for a few years without reviewing it, there's a good chance you're paying more than you need to. Lenders tend to reserve their sharpest rates for new customers, which means loyal borrowers often end up on higher rates over time.

Even a small rate difference adds up. On a $500,000 loan, a 0.5% reduction could save you over $150 a month — and tens of thousands over the life of the loan. (Figures are illustrative — actual savings depend on your loan size, term, and rate.)

Your Fixed Rate Is About to Expire

When a fixed-rate period ends, most loans automatically roll onto the lender's variable rate — which is often higher than what you'd get by shopping around. The period just before your fixed rate expires is one of the best times to review your options.

If you know your fixed rate is ending in the next three to six months, start the conversation early. That way, you're ready to move when the time comes rather than defaulting onto a rate you didn't choose.

Your Circumstances Have Changed

Life changes, and your loan should reflect that. Common triggers include:

  • Your income has increased — you may qualify for better products or want to restructure your loan
  • You've paid down significant equity — if your loan-to-value ratio (LVR) has improved, you might access better rates or drop LMI
  • You've paid off other debts — a cleaner financial position can open up more competitive options
  • You want to consolidate debts — rolling higher-interest debts into your mortgage can reduce overall repayments, though you'll want to be careful about extending the term

You Want to Access Equity

If your property has increased in value or you've paid down a good chunk of the loan, you may be able to access that equity for renovations, an investment, or other purposes. Refinancing to a new lender — or restructuring with your current one — is often how this is done.

When Refinancing Might Not Be Worth It

You're Early in a Fixed-Rate Term

Breaking a fixed-rate loan early usually involves break costs, and these can be significant — sometimes tens of thousands of dollars, depending on the rate difference and how long is left on the term. If you're locked in, the numbers need to stack up clearly before it makes sense to move.

The Costs Outweigh the Savings

Refinancing isn't free. Depending on your situation, you might encounter:

  • Discharge fees from your current lender (typically a few hundred dollars)
  • Application or establishment fees with the new lender
  • Valuation fees
  • Break costs (if leaving a fixed rate)
  • Lenders Mortgage Insurance (LMI) — if your LVR is above 80% and the new lender requires it, this can be a substantial cost that wipes out any rate savings

A good broker will run the numbers with you before you commit, so you know exactly whether the switch saves you money after all costs are factored in.

You've Recently Changed Jobs or Your Income Is Unstable

Lenders assess your current financial position when you apply. If you've just started a new role, are still in a probationary period, or your income has recently dropped, it may be harder to get approved — or you might not qualify for the rates that make the switch worthwhile.

Your Loan Is Nearly Paid Off

If you only have a few years left on your mortgage, the savings from a lower rate are minimal because you're mostly paying down principal at that point. The effort and cost of switching may not be justified.

How the Refinancing Process Works

If you do decide to refinance, here's what to expect:

1. Review your current loan. Your broker looks at your existing rate, features, fees, and remaining term to understand your starting point.

2. Compare options across multiple lenders. This is where working with a broker really pays off. Instead of approaching one bank, your broker compares options across a wide panel of lenders to find the best fit for your situation.

3. Apply for the new loan. You'll provide updated financial documents — payslips, bank statements, and so on. Your broker handles the application and follows up with the lender.

4. Valuation and approval. The new lender values your property and assesses your application. Once approved, they issue loan documents.

5. Settlement. The new lender pays out your old loan. Your old lender discharges their mortgage, and the new one takes over. The whole process typically takes two to six weeks, depending on the lenders involved.

You don't need to do anything with your repayments during this time — everything keeps ticking along until the new loan settles.

How Often Should You Review Your Loan?

A good rule of thumb is to review your home loan every one to two years, or whenever something significant changes — a rate rise, a change in income, a fixed rate expiring, or a shift in your financial goals.

You don't have to refinance every time you review. Sometimes the answer is "you're already on a great deal." But you won't know unless you check.

A Free Review Takes the Guesswork Out of It

If you're wondering whether your current loan is still working for you, the simplest thing to do is get a second opinion. Our team at Calm Finance Co. can look at your existing loan, compare it against what's currently available, and give you a clear answer — no obligation, no pressure.

Book a free home loan review with us at Calm Finance Co., call us, or visit us at 622 Sturt Street, Ballarat Central. We'll give you the honest picture so you can decide with confidence.