---
title: When to Refinance Your Home Loan | Signs It's Time | GNT Finance
description: When to refinance your home loan: the signals that mean it's time, when to hold off, and what a 0.25% to 1% rate gap is worth on a Melbourne mortgage.
url: https://gntfinance.com.au/guides/when-to-refinance/
section: guides
updated: 2026-09-01
author: Gorakh Timilsina, GNT Finance
---

# When to refinance your home loan

**In short:** It is usually time to refinance when your rate is 0.25% to 0.50% or more above what a new customer pays, your fixed term is ending, your LVR has dropped below 80%, or your income and credit have improved since you took the loan. Hold off if your balance is small, you plan to sell within two years, or breaking a fixed rate would cost more than you save.

Most Melbourne home owners refinance too late, not too early. They wait for a reason to look at their loan, and by then they have paid the loyalty tax for years. This guide gives you a practical way to decide: the signals that say "review now", the situations where refinancing does not pay, and a simple table so you can put a dollar figure on your own rate gap. For the mechanics of the process, read the [complete refinancing guide](/guides/refinancing-guide/).

## Signals it is time to refinance

### Your rate is 0.25% or more above the market

The clearest signal. Lenders advertise sharp rates to new borrowers and quietly leave existing customers behind, so after two or three years your rate can drift 0.30% to 0.60% above the deal you would get today. Compare your rate against current offers on the same loan type and LVR using the [loan comparison calculator](/calculators/loan-comparison/), and compare comparison rates, not headline rates. Our [comparison rate explained](/guides/comparison-rate-explained/) guide shows why that matters.

### Your fixed term is ending

When a fixed rate expires, your lender rolls you onto a "revert" rate that is often one of its highest. You will be repriced anyway, so this is the cheapest possible moment to shop around: no break costs, and the new lender can time settlement to the expiry date.

### Your LVR has dropped below 80%

Paid down the loan, or has your property grown in value? Either way, if your loan is now below 80% of the current value you qualify for the lender's best pricing tiers and no LMI. Many borrowers who paid LMI at 90% LVR three years ago are now sitting at 75% without realising it. The [equity calculator](/calculators/equity/) will give you a quick estimate.

### Your income or credit score has improved

A pay rise, a second income in the household, a cleared personal loan, or a credit file that has recovered from a rough patch all widen your lender options. The loan you could get today may be noticeably better than the one you qualified for when your circumstances were tighter.

### Your life has changed

Marriage, separation, a new baby, a move to part-time work, or an inheritance can all mean your loan structure no longer fits. Refinancing lets you add or remove a borrower, change from joint to single, adjust the term, or split the loan.

### You want an offset account

If you keep $20,000 or more in savings and your loan has no offset, you are paying interest you could avoid. On a $500,000 loan at 6.00% for illustration, $30,000 in an offset saves about $1,800 a year. That alone can justify a move.

### You want equity for investing

If you plan to buy an investment property, refinancing to release equity is often the first step. It gives you a deposit without selling anything, and structuring it as a separate split keeps the investment interest clearly identifiable.

### Your interest-only period is expiring

When interest-only ends, repayments jump because the principal must be repaid over a shorter remaining term. Refinancing lets you reassess: extend interest-only if the strategy still suits, or switch to principal and interest at a sharper rate.

### Your lender is not passing on cuts

When the cash rate falls, lenders decide how much to pass on and how quickly. If yours has passed on less than others, or delayed the cut for existing customers, that is a signal. Our guide on the [RBA cash rate and your mortgage](/guides/rba-cash-rate-and-your-mortgage/) explains how these decisions flow through.

## What a rate gap is worth

Multiply your balance by the gap and you have a rough first-year interest saving. Here it is for typical Melbourne loan sizes.

| Loan balance | 0.25% gap | 0.50% gap | 0.75% gap | 1.00% gap |
|---|---|---|---|---|
| $400,000 | $1,000 a year | $2,000 a year | $3,000 a year | $4,000 a year |
| $600,000 | $1,500 a year | $3,000 a year | $4,500 a year | $6,000 a year |
| $800,000 | $2,000 a year | $4,000 a year | $6,000 a year | $8,000 a year |

These are approximate interest savings in the first year. The saving in your monthly repayment is a little lower because part of each repayment is principal. Against a typical refinance cost of $1,000 to $2,000, anything from the 0.25% column onwards on a $600,000 loan pays for itself within the first year.

## Time since your last review

Use this table as a simple prompt.

| Time since your loan was set up or last repriced | What it usually means |
|---|---|
| Under 12 months | Probably still competitive. Check your rate annually. |
| 1 to 2 years | Likely 0.10% to 0.30% above new-customer pricing. Ask your lender for a reprice. |
| 2 to 4 years | Often 0.30% to 0.60% behind. Get a full comparison. |
| 4 years or more | Very likely paying the loyalty tax. Refinancing usually pays. |
| Fixed term ending within 3 months | Start comparing now so the new loan settles at expiry. |
| Interest-only period ending within 6 months | Review structure and rate before repayments step up. |

## When not to refinance

### Your loan balance is small

On a balance under about $150,000 to $200,000, a 0.50% saving is $750 to $1,000 a year. That still beats fees, but only just, and the effort may not be worth it. Repricing with your current lender is usually the better move.

### You plan to sell soon

If you will sell within 12 to 24 months, you may not hold the new loan long enough to recover the costs. Some lenders also charge a discharge fee within a set period. Do the break-even sum honestly.

### You are on a fixed rate with a big break cost

If rates have fallen since you fixed, the break cost can be thousands. When the cost exceeds the savings for the remaining fixed period, wait for expiry. Get a written quote before deciding.

### Your LVR is above 80%

Refinancing above 80% means paying LMI again, and the premium is not transferable from your original lender. Unless you are moving from a very expensive loan, it rarely stacks up. Pay down the balance or wait for the property to grow.

### Your job or income has changed recently

Lenders like stability. If you started a new job in the last three to six months, are still on probation, or have been self-employed for less than two years, many lenders will decline or offer a worse rate. Wait until your income history is clean.

## Worked example: a Sunbury couple

Priya and Daniel bought in Sunbury five years ago. Their loan is $520,000 with 27 years remaining, and they are on 6.45% (illustration only). They have never asked their lender for a better deal.

A broker finds them 5.85% with another lender at 72% LVR. The couple's costs to refinance are $350 discharge, $250 settlement and a few hundred in government fees, roughly $900 to $1,000 all up. The new lender waives its application and valuation fees.

| | Current loan | Refinanced loan |
|---|---|---|
| Balance | $520,000 | $520,000 |
| Remaining term | 27 years | 27 years (kept the same) |
| Rate (illustration) | 6.45% p.a. | 5.85% p.a. |
| Monthly repayment | $3,392 | $3,196 |
| Monthly saving | | $196 |
| Annual saving | | $2,353 |
| Refinance costs | | About $1,000 |
| Break-even | | About 5 months |

They keep the term at 27 years, so the saving is real and not an illusion created by stretching the loan. If they keep paying the old $3,392 instead, the extra $196 a month knocks about three years off the loan.

## A quick refinance-readiness checklist

- Your rate is 0.25% or more above what new customers pay
- Your fixed or interest-only period ends within six months
- Your LVR is below 80% on today's value
- You have been in your job at least six months (or self-employed two years)
- No missed repayments in the last 12 months
- No new debts or credit card limits since the original loan
- You plan to keep the property for at least two years
- You have your last two payslips and six months of loan statements handy

Tick six or more and it is worth a conversation. Run your figures through the [refinance calculator](/calculators/refinance/) first for an estimate.

## Common mistakes in timing a refinance

### Waiting for the "perfect" rate

Borrowers sometimes hold off because a rate cut looks likely. The saving from moving now usually beats the small extra gain from waiting, and a variable loan will fall with the market anyway.

### Reviewing only when the fixed term ends

That is a good trigger, but not the only one. Variable-rate borrowers with no natural prompt often go five years or more without a review.

### Refinancing every time a slightly better deal appears

Each refinance costs money and adds an enquiry to your credit file. Move when the gap is meaningful, not every six months.

### Forgetting the term

Accepting a fresh 30-year term when you had 24 years left will make repayments look lower but costs you years of extra interest.

## Frequently asked questions

### How often should I review my home loan?

Once a year is a sensible minimum, and always when a fixed or interest-only period is ending. A review does not mean you refinance every time. It means checking your rate against the market and asking your lender to reprice if there is a gap. A broker can do this in a few minutes with your latest statement, and most borrowers who review annually never fall far behind.

### Is it worth refinancing for 0.5%?

For most loans over about $250,000, yes. A 0.5% gap on $500,000 is roughly $2,500 in interest in the first year, against typical costs of $1,000 to $2,000. What changes the answer is your situation rather than the percentage: a fixed-rate break cost, an LVR above 80%, or plans to sell soon can all wipe out the benefit. Check those three things before you compare rates.

### Should I refinance before or after a rate cut?

Refinance when the gap between your rate and the market justifies it, regardless of what the cash rate might do next. If you move to a variable loan, you receive future cuts anyway. Waiting for a cut that may not come costs you the saving in the meantime, and lenders often trim new-customer discounts when the cash rate falls, so the gap can narrow rather than widen.

### Can I refinance with less than 20% equity?

Yes, many lenders refinance up to 90% LVR and some go higher, but you will pay lenders mortgage insurance again on the new loan. LMI already paid to your first lender does not transfer. On a $500,000 loan at 88% LVR, the premium can run into several thousand dollars, so the interest saving needs to be substantial. Repricing with your current lender is often the better option until you cross 80%.

### Should I refinance if I plan to sell in 2 years?

It can still work, but do the sums carefully. If the refinance costs $1,500 and saves $200 a month, you break even in about eight months and come out ahead over two years. If breaking a fixed rate is involved, or the saving is under $100 a month, it is usually not worth the effort. Also check whether the new lender charges an early discharge fee.

### What is the loyalty tax on a home loan?

The loyalty tax is the gap between what long-standing customers pay and what the same lender offers new borrowers on the same product. It builds up because lenders pass rate rises on to everyone but reserve their sharpest discounts for new business. After a few years the gap is commonly 0.30% to 0.60%, and on a $600,000 loan that is $1,800 to $3,600 a year.

## Talk to GNT Finance

If any of the signals on this page sound like your loan, send us your latest statement and we will tell you within a day whether a reprice or a refinance makes sense. Gorakh Timilsina assessed hundreds of applications as a senior credit officer, so you get a realistic view before anything is lodged. We help borrowers from [Sunbury](/mortgage-broker/sunbury/) across Melbourne through our [refinancing service](/services/refinancing/). [Book a free consultation](/contact/) or call 0426 403 703.

*This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.*