When should you refinance? The signals that matter — and when to stay put

There is no calendar rule for refinancing. Some borrowers benefit from reviewing their loan after a year; others are genuinely better off leaving a good loan alone for a decade. What matters is recognising the specific signals that suggest your current loan no longer fits — and, just as importantly, the situations where refinancing would cost you more than it saves. This guide covers both sides honestly.

Signal 1: Your rate has quietly crept up

Lenders compete hard for new customers and far less hard to keep existing ones. Over time, the gap between what you pay and what the same lender offers new borrowers tends to widen — a pattern often called the loyalty tax. You will not get a letter about it; the drift happens through out-of-cycle rate changes and new-customer discounts you never see.

The test is simple: find your current rate on your statement, then check what your own lender advertises to new customers for the same loan type and LVR. If there is a meaningful gap, you have a live signal. Your first move can be a repricing request with your current lender — we cover how in our guide to the [loyalty tax on home loans](/articles/refinance/loyalty-tax-home-loans) — and if they will not close the gap, the market probably will.

Signal 2: Your fixed rate is about to expire

When a fixed term ends, most loans roll automatically onto the lender's revert rate, which is often higher than what new customers are offered. This makes fixed-rate expiry the single most predictable refinancing trigger there is — you know the date months in advance.

Start reviewing your options two to three months before expiry so a refinance can settle around the rollover date without break costs. Our [fixed rate cliff guide](/articles/refinance/fixed-rate-cliff-guide) walks through the timing in detail.

Signal 3: You've crossed an equity milestone

Your loan-to-valuation ratio (LVR) determines which pricing tiers you qualify for. Lenders typically price loans in LVR bands, and crossing below thresholds — especially 80 per cent, and often again at lower bands — can unlock sharper rates that simply were not available when you first borrowed.

You cross these milestones two ways: by paying down the loan, and by your property rising in value. If you bought with a small deposit a few years ago and your suburb has moved, you may have crossed below 80 per cent without noticing. That transforms the refinancing maths: no LMI, more lenders competing for you, better pricing. Check where you stand with our [LVR and LMI calculator](/calculators/lvr-lmi).

Signal 4: Your life has changed

Loans are structured around the circumstances you had at application. When circumstances change, the structure can stop fitting:

• Income has risen — you might want to shorten the term or add an offset account to work harder against interest
• A renovation or investment purchase is coming — refinancing can release usable equity
• Household income has dropped or is about to (parental leave, career change) — restructuring while you still service comfortably can build in flexibility
• You've accumulated other debts — consolidating may help cash flow, though it carries real trade-offs we cover in our [debt consolidation guide](/articles/refinance/debt-consolidation-refinance)
• Separation or a change in ownership — the loan may need to be rewritten regardless

A loan review after any major life event costs nothing and often surfaces options you did not know existed.

Signal 5: You're paying for features you don't use — or missing ones you need

A packaged loan with an annual fee, premium credit card and offset account is poor value if you keep no savings in the offset and never use the card. Equally, a bare-bones loan is poor value if you have significant savings sitting in a transaction account earning nothing when an offset could be reducing your interest daily. Fit matters as much as rate.

When NOT to refinance

Refinancing has real costs — discharge fees, government registration fees, potentially break costs — and situations where it works against you:

• Short remaining term. If you have only a few years left on your loan, the interest saving from a lower rate is small in dollar terms and may not recover the switching costs. Run the numbers over your actual remaining term with a [repayment calculator](/calculators/repayment) before moving.
• Your equity is under 20 per cent. Refinancing above 80 per cent LVR usually means paying LMI again with the new lender, because premiums do not transfer. A new LMI premium can wipe out years of rate savings. Unless there is a compelling reason, waiting until you are under 80 per cent is often the better play.
• You're deep in a fixed term. Break costs can be substantial, particularly if market rates have fallen since you fixed. Get a payout figure first; sometimes the maths still works, often it does not.
• Your credit or income position has weakened. A refinance is a full new application assessed under NCCP responsible-lending rules, typically with a buffer of around 3 percentage points above the actual rate. Missed payments, a new job on probation, reduced income or recent credit issues can mean the application fails — and the enquiry still lands on your credit file. If your position has weakened, repairing it first usually beats applying anyway.
• You'd be resetting the term for no reason. Rolling a loan with 22 years remaining into a fresh 30-year term cuts your monthly repayment but can increase total interest substantially. If you refinance, match your remaining term or keep repayments at their current level.
• You're about to sell. If the property is likely to be sold within a year or so, the switching costs may never be recovered.

A simple way to decide

Add up the one-off costs of switching, then work out the monthly saving on the new loan over your remaining term. If the costs are recovered within roughly the first year or two, and none of the red flags above apply, refinancing usually earns its keep. If the payback period is long, or a red flag applies, staying put — perhaps after a repricing request with your current lender — is a perfectly good decision. You can see what a refinance involves end to end on our [refinance page](/loans/refinance).

Talk it through with a broker

A broker can check your rate against the current market, estimate your LVR position, and tell you plainly if refinancing is not worth it in your situation. If you would like that sanity check, [get in touch](/contact) — it costs nothing and usually takes one conversation.