Your lender isn't going to call and offer you a lower rate. If your home loan has been sitting untouched for more than a year, particularly if you've recently come off a fixed term, there's a strong chance you're paying more than you need to.
Refinancing to secure a lower interest rate is one of the most direct ways to reduce what you're paying each month and over the life of your loan. The decision to refinance isn't just about chasing the lowest advertised rate. It's about understanding what you're currently paying, what's available now, and whether the difference justifies the effort and cost of switching.
What Does Refinancing to a Lower Rate Actually Mean?
Refinancing to a lower rate means replacing your current home loan with a new one that charges less interest. The new loan pays out your existing mortgage, and you continue making repayments under the terms of the new agreement. The rate you're offered depends on your loan amount, property valuation, income, and the lender's assessment of your circumstances.
Consider a borrower in Melbourne's inner west who took out a mortgage three years ago at 4.8% and hasn't reviewed it since. That same borrower today, with the same property and similar income, might qualify for a rate closer to the current variable offerings, which could sit meaningfully lower depending on their lender panel and loan structure. Over a loan term, even a modest reduction in your interest rate can save tens of thousands of dollars.
When Does It Make Sense to Refinance for a Lower Rate?
It makes sense to refinance when the interest you'll save outweighs the costs involved in switching. Those costs typically include application fees, valuation fees, and sometimes discharge fees from your current lender. A refinance is worth pursuing if the rate difference is at least 0.5% and you plan to stay in the property for more than a couple of years.
If your fixed rate period is ending, now is the time to act. Many borrowers who locked in rates during the pandemic are reverting to variable rates that sit significantly higher than what's available through a refinance. Waiting until after you've rolled onto the revert rate means you've already started paying more than necessary.
We regularly see borrowers who assume their existing lender will offer them something closer to market when their fixed term ends. That rarely happens unless you actively request it, and even then, the rate offered is often higher than what you'd receive by switching lenders.
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How Much Could You Actually Save?
The amount you save depends on your loan amount and the size of the rate reduction. If you're currently paying interest on a loan and you reduce your rate, your monthly repayments drop, and the total interest paid over the life of the loan decreases.
In a scenario like this: a borrower with a remaining loan balance holds a rate that's higher than current market offerings. By refinancing to a lower rate, monthly repayments reduce by several hundred dollars. Over the remaining loan term, that difference compounds into significant savings. The exact figure depends on your loan structure, offset balance, and repayment behaviour, but the principle holds across most situations.
This is why a loan health check is worth doing annually. Rates shift, lender policies change, and your circumstances evolve. What was suitable two years ago might no longer be the most appropriate option today.
What's Involved in the Refinance Process?
The refinance process involves submitting a new loan application, which includes updated income verification, a property valuation, and a credit assessment. Your broker will prepare the application, liaise with the new lender, and coordinate settlement once the loan is approved.
Most refinances settle within four to six weeks, depending on how quickly you can provide supporting documents and how long the valuation and credit assessment take. If you're refinancing to access equity or consolidate debt at the same time, the process may take slightly longer, but the steps remain the same.
You'll need to provide payslips, tax returns if you're self-employed, details of your current loan, and information about any other debts or commitments. The new lender will also want to confirm that the property valuation supports the loan amount you're requesting.
Does Refinancing Affect Your Loan Features?
Refinancing gives you the opportunity to reassess the features attached to your loan. If your current loan lacks an offset account or redraw facility, switching to a product that includes these can improve your cashflow and reduce the interest you pay over time.
An offset account works by holding your savings in a separate transaction account linked to your mortgage. The balance in that account offsets the loan balance when interest is calculated, which means you pay interest on a lower amount without actually reducing your loan principal. For borrowers with variable income or irregular expenses, this can be more useful than making extra repayments directly onto the loan.
Some lenders also offer the ability to split your loan between variable and fixed portions, which can provide a balance between rate certainty and flexibility. If you're refinancing, it's worth considering whether your current structure still suits your circumstances or whether a different approach would serve you now.
What About Borrowers Who've Recently Come Off a Fixed Rate?
If your fixed term has just ended and you've reverted to your lender's standard variable rate, refinancing should be a priority. Revert rates are almost always higher than the variable rates offered to new customers, and your lender has no obligation to move you to a lower rate unless you ask.
Many borrowers across Victoria who fixed their loans two or three years ago are now sitting on revert rates that are significantly higher than what's currently available. The gap between what they're paying and what they could be paying is often substantial, and the longer they wait, the more interest they're paying unnecessarily.
Your broker can request a rate reduction from your current lender, but if they're not willing to move meaningfully, switching to a new lender is usually the most effective option. The application process is the same as any other refinance, and in most cases, the savings justify the effort within the first year.
How Do You Know If You're Paying Too Much?
If you haven't had your loan reviewed in the past 12 months, or if your current rate sits more than 0.5% above what similar borrowers are being offered, you're likely paying more than you need to. The only way to know for certain is to compare your current loan against what's available now based on your circumstances.
A mortgage broker can run a comparison using your loan details, property type, and financial position. That comparison will show you what rates you're likely to qualify for, what the monthly saving would be, and what costs are involved in switching. From there, you can make an informed decision about whether refinancing makes sense.
You don't need to wait for a major life change or financial pressure to review your home loan. Refinancing to access a lower rate is a proactive decision that puts you in control of what you're paying, rather than leaving it to your lender's discretion.
What Happens After You Decide to Refinance?
Once you've decided to refinance, your broker will prepare your application and submit it to the lender. You'll be asked to provide supporting documents, and the lender will order a valuation of your property. If the valuation comes in at or above what's needed to support the loan, and your income and credit assessment are satisfactory, the loan will move to approval.
After approval, the new lender will arrange settlement, which involves paying out your existing loan and registering the new mortgage. You'll receive confirmation once settlement is complete, and your repayments will switch to the new loan from that point.
Your broker will manage most of the coordination, but you'll need to respond promptly to requests for documents or information to keep the process moving. The sooner you start, the sooner you'll be paying less interest each month.
If you're ready to find out whether refinancing could reduce what you're paying, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
How much do I need to save on my interest rate for refinancing to be worth it?
A rate reduction of at least 0.5% is typically worth pursuing, provided you plan to stay in the property for more than a couple of years. The interest you save over time should outweigh the costs involved in switching lenders.
What costs are involved in refinancing to a lower rate?
Refinancing usually involves application fees, valuation fees, and sometimes discharge fees from your current lender. Your broker can help you understand the total cost and whether the savings justify the switch.
How long does it take to refinance a home loan?
Most refinances settle within four to six weeks, depending on how quickly you provide supporting documents and how long the lender takes to complete the valuation and credit assessment.
Can I refinance if I've just come off a fixed rate?
Yes, and it's often one of the most effective times to refinance. Borrowers who revert to their lender's standard variable rate after a fixed term usually pay more than necessary, and switching to a new lender can result in significant savings.
Will refinancing affect the features on my home loan?
Refinancing gives you the opportunity to reassess your loan features. You can add an offset account, switch between variable and fixed, or adjust your loan structure to suit your current circumstances.
