Your home loan is likely one of the biggest financial commitments you'll ever make. But just because you secured a competitive mortgage when you purchased your property doesn't mean it's still the best option for you today.
Interest rates change, property values fluctuate, lenders introduce new products, and your personal financial circumstances evolve.
That's why regularly reviewing your home loan can be an important part of managing your finances.
Refinancing your home loan could help you reduce repayments, access useful loan features, consolidate certain debts or restructure your mortgage to better suit your financial goals.
However, refinancing isn't always the right decision. Understanding when to review your loan, and what costs to consider, can help you make a more informed choice.
Here are seven signs it might be time to review your home loan.
One of the most common reasons Australians consider refinancing is to secure a more competitive interest rate.
Home loan rates can change over time, and the rate you originally agreed to may no longer be competitive.
Lenders also regularly update their mortgage products and pricing, meaning newer customers may sometimes have access to different offers.
Consider this hypothetical example:
You have a remaining home loan balance of $500,000, with 25 years left on your mortgage.
| Home Loan Details | Current Loan | Potential New Loan |
|---|---|---|
| Loan Balance | $500,000 | $500,000 |
| Interest Rate | 6.50% p.a. | 5.90% p.a. |
| Remaining Loan Term | 25 years | 25 years |
| Approx. Monthly Repayment | $3,376 | $3,191 |
Potential Monthly Saving: Approximately $185
Potential Annual Saving: Approximately $2,220
While this example demonstrates how a lower interest rate could reduce repayments, actual savings depend on your loan structure, fees, interest rate changes and repayment arrangements.
It's also important to compare loans using the same remaining term. Extending your mortgage term may lower monthly repayments while increasing the total interest paid over time.
Figures are illustrative, assume principal-and-interest repayments at constant rates, and exclude fees.
If you previously secured a fixed-rate mortgage, it's worth reviewing your options before the fixed-rate period expires.
When a fixed-rate period ends, your loan will generally move to a variable interest rate determined by your lender unless you arrange another option.
That new rate may be higher than your previous fixed rate, potentially increasing your repayments.
Consider reviewing:
It's generally helpful to begin reviewing your options several weeks before your fixed rate expires, allowing time to compare products and understand the application process.
Important: Refinancing before a fixed-rate period ends may trigger break costs. These should be checked before making changes.
If your property has increased in value since you purchased it, you may have built additional equity.
Equity is the difference between your property's current market value and the amount you owe on your mortgage.
For example:
An increase in equity may improve your loan-to-value ratio (LVR), which can influence the interest rates and loan products available to you.
Your LVR measures your outstanding loan against your property's value.
LVR = Loan Balance ÷ Property Value × 100
Using the example above:
$500,000 ÷ $800,000 × 100 = 62.5% LVR
A lower LVR may give you access to more competitive lending options, depending on the lender and your overall financial position.
In some circumstances, property owners may also be able to access usable equity for renovations, investments or other purposes.
However, accessible equity is not the same as total equity. Lenders will assess borrowing capacity, serviceability, lending policies and other requirements before approving additional funds.
Your home loan should ideally support your current financial circumstances, not just the situation you were in when you originally applied.
Over time, your income, employment arrangements, household expenses and financial priorities may change.
For example, you may have:
These changes could affect which mortgage structure is most appropriate for you.
Someone with increased income may want to make additional repayments to reduce their mortgage faster.
Another borrower may prefer access to an offset account to help manage savings and interest expenses.
A household experiencing reduced income may want to review repayment arrangements and available support options.
Refinancing may be one solution, but it isn't always necessary. Sometimes your existing lender can adjust your loan features or offer alternative arrangements.
If you're experiencing difficulty meeting repayments, contact your lender's financial hardship team early rather than relying on refinancing approval.
The interest rate isn't the only factor worth considering when reviewing a mortgage.
Loan features can influence how effectively you manage your finances and how much interest you pay over time.
An offset account is a transaction account linked to an eligible home loan.
The money held in the offset account reduces the loan balance used to calculate interest.
For example, if you have:
Interest may be calculated on $460,000 rather than the full $500,000, assuming a 100% offset arrangement.
This can reduce interest costs while allowing you to retain access to your savings.
A redraw facility may allow you to access eligible additional repayments you've made towards your mortgage.
However, redraw conditions, limits and access arrangements vary between lenders.
Some home loans allow unlimited extra repayments, while others may restrict additional payments or charge fees.
If your current mortgage doesn't offer features that suit your financial habits, it may be worth exploring alternative products.
Remember that loans with additional features may come with higher rates or fees, so the overall value should be considered.
Refinancing can also be worth exploring when your financial goals change.
For example, you might be considering:
If your property has increased in value or you've reduced your mortgage balance, you may have usable equity that could contribute towards your next financial goal.
Some homeowners refinance to access equity for an investment property deposit and associated purchasing costs.
However, using equity increases your borrowing and introduces additional financial obligations.
Before proceeding, it's important to understand the impact on your repayments, cash flow and overall financial position.
Loan purpose and structure can also affect taxation outcomes. Investors should seek advice from a qualified tax professional before restructuring debt.
Refinancing should support a well-considered financial strategy rather than simply increase the amount you can borrow.
If it's been more than a year since you last reviewed your mortgage, it may be worth checking whether your current loan is still competitive.
Even if your financial circumstances haven't changed, the lending market may have.
A home loan review can help you understand:
Importantly, a mortgage review doesn't mean you have to refinance.
Sometimes your existing lender may offer a better interest rate or alternative loan arrangement without requiring you to move to another provider.
The goal is to make sure your mortgage continues to suit your circumstances.
Although refinancing may offer financial benefits, it's important to consider the associated costs before making a decision.
Depending on your existing and proposed loans, these may include:
Discharge Fees: Your existing lender may charge an administration fee when closing your mortgage.
Application Fees: Some lenders charge fees to establish a new home loan.
Property Valuation Fees: A lender may require an updated valuation of your property.
Government Registration Fees: Mortgage discharge and registration fees may apply.
Lenders Mortgage Insurance (LMI): Depending on your LVR and the lender's requirements, refinancing could result in new LMI costs.
Fixed-Rate Break Costs: If you're exiting a fixed-rate loan early, substantial break costs may apply.
Ongoing Fees: Annual package fees or other account charges may affect the overall value of a new loan.
Before refinancing, compare the total costs against the expected benefits.
A useful way to assess refinancing is to calculate the break-even period.
This estimates how long it may take for the savings from a new loan to offset the upfront refinancing costs.
Assume:
Break-Even Period = Refinancing Costs ÷ Monthly Savings
$1,200 ÷ $150 = 8 months
In this hypothetical example, it would take approximately eight months for the repayment savings to recover the upfront refinancing costs.
However, this simplified calculation doesn't account for all potential differences in interest costs, loan terms, features or ongoing fees.
A full comparison should assess the total cost of both loans over a relevant period.
Before moving your mortgage to another lender, consider contacting your existing lender to request a rate review.
Some lenders may be willing to offer a more competitive rate to retain an existing customer.
You could ask:
If your lender offers a competitive arrangement, you may be able to improve your mortgage without completing a full refinance.
However, if your existing lender cannot offer suitable terms, comparing alternative lenders may be worthwhile.
As a general guide, reviewing your home loan at least once every 12 months can help you stay informed about your mortgage options.
You may also benefit from reviewing your loan sooner if:
Regular reviews can help identify opportunities, even when refinancing itself isn't necessary.
Understanding the different mortgage products, lender policies and refinancing costs can feel overwhelming, particularly when you're managing work, family and other financial commitments.
At DDP Finance, we understand that every borrower's circumstances and financial goals are different.
A home loan review can help you explore whether your existing mortgage remains suitable or whether alternative options may better align with your needs.
Depending on your circumstances, this may involve:
Whether you're hoping to reduce repayments, access useful loan features or prepare for your next property purchase, understanding your options is an important first step.
The best time depends on your financial circumstances, existing mortgage terms and available alternatives. It may be worth reviewing your loan when your fixed rate expires, your property value increases or your current interest rate becomes less competitive.
Potential savings depend on your loan balance, interest rate reduction, remaining loan term and refinancing costs. Even a relatively small rate reduction may produce meaningful savings over time, particularly on larger mortgages.
Potentially. Some lenders offer refinancing options to borrowers with higher LVRs. However, lending restrictions and lenders mortgage insurance may apply, making refinancing more expensive.
Applying for a new home loan may result in a credit enquiry, which can affect your credit score. The impact varies depending on your credit history and circumstances.
You may be able to change loan products or negotiate a better interest rate with your existing lender. This is sometimes referred to as an internal refinance or loan variation, depending on the arrangement.
Refinancing timeframes vary depending on the lender, application complexity, valuation requirements and settlement arrangements. Some applications can be completed within a few weeks, while others take longer.
It depends on the potential savings compared with the refinancing costs. For smaller loan balances, fees may outweigh the benefit of a lower interest rate, so a break-even calculation can be particularly useful.
Yes, refinancing may be available for investment property loans, subject to lender requirements and your financial circumstances. Investors should also consider loan structure and potential taxation implications before making changes.
Your home loan shouldn't be something you set up once and never revisit.
As interest rates, property values and personal circumstances change, reviewing your mortgage can help ensure it continues to support your financial goals.
Whether you're paying a higher interest rate than necessary, approaching the end of a fixed-rate period or planning your next property purchase, a home loan review may uncover opportunities worth exploring.
The important thing to remember is that refinancing isn't always about switching lenders. It's about making sure your mortgage remains suitable, competitive and aligned with your needs.
If you're unsure whether your current mortgage is still competitive, DDP Finance can help you explore your options.
Visit DDP Finance to learn more about home loans, refinancing and finance solutions.
Disclaimer: This article contains general information only and does not constitute personal financial, credit, legal or taxation advice. Lending criteria, rates, fees and refinancing outcomes vary between lenders and individual circumstances. All numerical examples are hypothetical. Seek advice from appropriately qualified professionals before making financial decisions.
