Everything You Need to Know About Refinancing Rates

If you bought your first home in the past few years, you might assume you're locked into your current rate until your loan is fully paid off.

You're not. Refinancing to a lower rate can reduce your repayments, improve your loan features, and put you in a stronger financial position. Many first-time buyers overlook this option because they think refinancing is only for people who've been in their home for years or that switching lenders is complicated. Neither is true.

Why First-Time Buyers Often Pay More Than They Need To

First-time buyers typically borrow at higher loan-to-value ratios, which can mean paying a higher interest rate at the time of purchase. Once you've built some equity or market conditions shift, you may qualify for a lower rate with your current lender or a new one. Lenders compete for your business, and refinancing lets you take advantage of that competition.

Consider a buyer who purchased an apartment with a 10% deposit two years ago. At the time, they accepted a rate of 6.4% because their deposit was small and they had limited borrowing history. Two years later, the property has increased in value and they've paid down some of the loan. Their loan-to-value ratio has dropped to 75%, which opens access to lower rates. By refinancing, they could reduce their rate to 5.9%, saving around $200 per month on a $450,000 loan. Over the remaining loan term, that adds up.

When Does Refinancing Make Sense for a First-Time Buyer?

Refinancing makes sense when the interest you save outweighs the costs of switching. This typically happens when you can secure a rate at least 0.3% to 0.5% lower than your current one. You should also consider refinancing if you're coming off a fixed rate period and reverting to a higher variable rate, or if you want access to features like an offset account or redraw facility that your current loan doesn't offer.

Other triggers include consolidating personal debt into your mortgage to reduce overall interest costs, or releasing equity to fund an investment or renovation. If you're stuck on a rate above 6% and comparable loans are sitting closer to 5.5%, a loan health check can confirm whether refinancing is worthwhile.

What to Expect During the Refinance Process

The refinance application follows a similar path to your original home loan. Your new lender will assess your income, expenses, and credit history, and they'll conduct a property valuation to confirm your equity position. You'll need to provide recent payslips, tax returns if you're self-employed, and details of any other debts.

Most refinances take between three and six weeks to settle, depending on how quickly you supply documents and whether the valuation comes back as expected. If your property has increased in value since purchase, you may avoid paying lender's mortgage insurance on the new loan, even if you paid it the first time around. That alone can make refinancing more affordable than you'd expect.

Fixed Rate Expiry and What It Means for Your Repayments

If you're coming off a fixed rate, your loan will automatically revert to your lender's standard variable rate unless you take action. That reversion rate is often higher than what new borrowers are offered, which means your repayments could jump significantly. Refinancing before your fixed rate expires gives you control over what happens next, whether that's locking in a new fixed term or switching to a variable rate with an offset account.

In a scenario where a first-time buyer locked in a three-year fixed rate at 2.5% in early 2021, their loan might revert to a variable rate of 6.8% today. On a $500,000 loan, that shift could increase monthly repayments by more than $1,000. Refinancing to a competitive variable rate of 5.8% keeps repayments manageable and avoids the reversion rate trap entirely.

Accessing Equity Without Selling Your Home

Once you've built equity in your property, you can access it through refinancing without selling. This is particularly useful if you want to buy an investment property, renovate, or consolidate other debts. Lenders typically allow you to borrow up to 80% of your property's current value without paying mortgage insurance, which means if your home is now worth $600,000 and you owe $400,000, you could access up to $80,000 in usable equity.

This approach works if your income supports the higher loan amount and you have a clear purpose for the funds. Releasing equity isn't suitable for discretionary spending, but it can be a practical way to fund financial goals that add value or reduce higher-interest debt.

How to Compare Refinance Rates Without Getting Overwhelmed

Comparing rates means looking beyond the headline number. A loan with a slightly higher rate might offer features that save you more in the long run, such as an offset account, free redraws, or the ability to make extra repayments without penalty. You should also check the comparison rate, which includes most fees and gives a clearer picture of the loan's true cost.

Working with a mortgage broker simplifies this process because brokers can compare multiple lenders at once and highlight options suited to your situation. They can also identify lenders that are more flexible with first-time buyers who've had short employment gaps or changes in income since purchase. A refinance arranged through a broker often results in lower fees and a faster settlement because brokers know which lenders to approach and how to structure the application.

What Costs Are Involved in Refinancing?

Refinancing involves application fees, valuation fees, and sometimes discharge fees from your current lender. These costs typically range from $500 to $1,500 depending on the lender and the complexity of your situation. Some lenders waive application fees or offer cashback incentives to new customers, which can offset the upfront costs.

You should also check whether your current loan has any break costs if you're exiting a fixed rate early. These costs can be significant if rates have fallen since you fixed your loan, so it's worth calculating whether the long-term savings justify the upfront expense. In most cases, if you're switching to a rate more than 0.5% lower and you plan to stay in the loan for at least two years, refinancing will save you money overall.

If your fixed rate period has already ended or you're on a variable rate, there are usually no break costs. Your broker can run the numbers and confirm whether refinancing makes financial sense before you commit to an application.

Should You Switch to Fixed or Variable When You Refinance?

The decision between fixed and variable depends on your risk tolerance and financial goals. A fixed rate gives you certainty over your repayments for a set period, which can be useful if you're budgeting tightly or expect rates to rise. A variable rate offers flexibility to make extra repayments, access an offset account, and take advantage of rate cuts when they happen.

Some borrowers split their loan between fixed and variable to get the stability of a fixed rate and the flexibility of a variable portion. This approach works if you want to lock in part of your repayments while keeping the option to pay down your loan faster or access features like redraw.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare what's available, and show you exactly how much you could save by refinancing.

Frequently Asked Questions