How soon can you refinance a home loan?

7 min read | 12 Aug 2022

Have you recently seen your home loan lender advertising a lower rate than the rate you’re getting with them? If yes, we know, it hurts. Your lender is cheating on you.

The fact is, if you look, there’s a good chance you’ll find a better alternative to what you have now. And if you spot a loan you think you’d be happier with, there are no rules about how soon before you can ditch your current loan and switch to a different one. Fees, yes, but rules, nope. Just make sure you do your sums beforehand, so you know any switching costs won’t outweigh the benefits.

As we’ve said, when and how often you refinance is 100% your call. The priority should always be to have the loan that works best for you. But there are still times and situations where it’s better, easier and less expensive to refinance than others, so you need to weigh up all the pros and cons. For example:

This is the perfect time to reassess because if you get your timing right, you’ll not only avoid a bunch of break fees, you can also make sure the variable rate you move to is a winner. See when your fixed-rate period ends as some lenders don’t move their customers onto their lowest variable rate because they assume most people couldn’t be bothered looking around and refinancing. Sneaky. This is also the right time to look into refinancing if you’re keen to lock in a fixed rate again - with whichever lender is offering the best deal.

Uh oh, this isn’t such a great time to switch. It’s still totally doable, but you’ll be charged significant break costs and admin fees, quite likely in the thousands. If you can, wait until the fixed-rate period ends to avoid those fees. If you absolutely don’t want to wait, consider working out how long it will take your new loan to recoup what you’ll pay out in break charges.

It’s a good time to consider refinancing if you want or need to make your repayments as low as possible for a while. Just remember you won’t be paying off any of what you originally borrowed - just the interest - which might make the overall term of your loan longer.

So you’ve been paying Interest Only for a while, but now your circumstances have changed, and you can afford to start paying off the principal. Great! That’s a green light, so go for it! Find out more about Principle and Interest home loans.

You want to shave time and money off your loan by shortening your loan term, but the way your loan is structured doesn’t allow it, or your lender won’t come to the party (or they will, but they’ll charge you for it). Sounds like a good time to switch to a lender that lets you refinance without the restart – i.e. someone who doesn’t dictate your terms by defaulting you back to the original 30-year sentence. Aim for just the number of years you have left, or if possible, even less. Check out our other hacks on how to pay off your home loan faster.

If your lender is advertising lower rates to attract new customers, it’s time to reassess your relationship with them. It’s as simple as checking if your rate is the same or if not lower than the ones advertised. If yours is higher, consider pulling them up on it to negotiate a lower rate or switch to a lender that rewards their existing customers.

Athena’s Automatic Rate Match means existing customers will always get the same rate as new customers on a like-for-like variable loan.

If you have a variable or split rate loan, open your emails or snail mail and read your statements. Make sure you understand exactly what your lender’s telling you; if they’re making not-so-great changes to your rates behind your back, it’s time to start looking around.

If your bank has been charging you monthly account fees, package fees, redraw fees, early payment fees, fees to switch to another lender or fees to sneeze, then you might be overdue to leave! Check your statements because they might be hidden. Some lenders make a huge amount out of their customers this way. We charge zero fees. Zilch.

Owning at least 20% equity in your home makes refinancing a much easier possibility. But if your LVR is still over 80%, and you had to pay to get Lenders Mortgage Insurance (LMI) with your current lender, you’ll have to pay it again if you refinance with a different lender. Sucks right?

Because LMI is designed to protect the lender, not you, you can’t take it with you. And it can be hefty, so make sure refinancing is what you really want to do. Sometimes it can be better to wait until you hit 80% (or lower). There’s no point in refinancing if the money you’re saving in interest rates gets spent on insurance. If your circumstances mean you’re better off refinancing, get ready to switch by finding out the ‘5 things to do before you refinance your home loan’.

Plenty of people refinance over and over again. The key is timing it so you end up in a better situation overall than you were before. Always check that the savings in repayments and fees outweigh the costs of refinancing, which at a minimum include a discharge fee (charged by most lenders, but not us, FYI) plus unavoidable government fees. Most lenders have a calculator showing how much you could save by switching. Try our savings calculator to see how your current loan stacks up against an Athena home loan. You’ll be blown away by how much you could save. If you want to know more, check out this article: ‘How often should you refinance your home loan?’

Refinancing can be a great move, but you want to have thought through all the details. Here are six more reasons why refinancing makes a whole lotta sense:

Getting a better interest rate - which is by far the main motivation for most people who refinance - means you could redirect those savings into other household expenses or use that money for a holiday, renovations or fresh pair of shoes. Whatever floats your boat.

Ploughing any savings from refinancing back into your home loan will help you pay off your mortgage earlier. Don’t underestimate the value even small amounts of extra money can make on a loan over time, and how much that will reduce the amount of interest you repay.

If the value of your home has gone up since you bought it, it means you have more equity in it. This gives you a lower LVR %, which means you can refinance to a better interest rate deal than you have now.

On top of switching to a loan that allows you to access your equity, refinancing can also be a cheaper alternative to a personal loan. Make sure you do your sums, though, as adding an extra amount to a long home loan could cost you more over time than a shorter loan. You can combat this by paying extra to get rid of the amount you’ve borrowed in, say, 5 years instead of the full 25 or 30.

‘Refinance to Renovate’ is generally used to pay for major structural work, such as an extra storey or a pool, where the value of the house will be higher once the renovations are finished. You restart by getting a new loan that’s borrowed against the eventual projected value of your improved property. Not all lenders offer this, so be sure to check upfront and shop around so you don’t pay a premium.

You might want an offset account or redraw facility, or cool benefits like a mortgage holiday. Or maybe you’re sick of paying for features you don’t use (you know they’re built into your interest rate). Refinancing gives you the chance to switch to a new loan or lender that will give you the flexibility to change your loan settings as you need. Make sure you check out Athena's home loan features that free you.

It’s never a bad time to at least think about refinancing, and it costs you nothing to check out and calculate how much you could save today. You’ve got nothing to lose except your home loan! Start saving a whole lotta time and money.