When should I refinance my mortgage?
It's a question many borrowers ask as interest rates shift and life circumstances change, yet most people just take out a mortgage and quietly pay it for years without once checking whether the deal still makes sense. Life shifts. Interest rates move. Equity builds. The loan just sits there, doing its thing, while the world changes around it.
That quiet inertia is costing you alot of money.
Research consistently shows that borrowers who stay on their lender's standard variable rate can pay hundreds, sometimes thousands, of dollars more each year than those who review and switch. This is known as the "loyalty tax" and I promise... in this instance, your loyalty is not worth it!
But refinancing at the wrong time, or without understanding what switching actually costs, can just as easily wipe out those savings before you have had a chance to enjoy them.
So, when is the right time to refinance?
You've been in the loan for two or more years.
The first couple of years of a mortgage are generally the worst window for refinancing. Discharge fees, application fees, government charges, and valuation costs almost always outweigh any short-term savings.
After two years, the maths begins to shift in your favour, though the precise tipping point depends on your lender's fee structure and the size of the rate differential.
If a fixed rate is involved, the timing matters even more.
Breaking a fixed-rate loan early triggers significant costs that can run into tens of thousands of dollars, which is covered in detail below.
Your rate is noticeably higher than what's available now.
The average variable home loan rate sits at around 5.90% p.a. based on RBA data for June 2026.
The big four banks are currently advertising variable rates in the 5.94% to 6.25% p.a. range, with lender-wide averages closer to 6.50%, 6.69% when you factor in a broader product mix. If your current rate is 0.5% or more above comparable offers, that gap compounds quickly.
On a $600,000 loan, half a percentage point is roughly $3,000 per year: money that simply leaves your account without benefit.
Your equity position has improved.
Rising property values and consistent repayments over time reduce your loan-to-value ratio (LVR). Lenders price risk, and borrowers with lower LVRs access better rates, with 80% LVR generally the key threshold below which you avoid Lenders Mortgage Insurance and access more competitive products. If your equity has grown since settlement, you may now qualify for products that were not available when you first took out the loan, a shift in borrowing power that alone can justify a review.
The real costs of refinancing most people underestimate:
Upfront, exit, and government fees
A standard variable-to-variable refinance typically costs between $500 and $2,000 in total. The main components are:A discharge fee from your current lender: $200- $500 (the big four banks commonly charge between $160 - $350). An application or establishment fee with the new lender: $0 - $750, though many lenders waive this for refinancers. A valuation fee: up to $600, depending on the lender and method used. Government mortgage registration and de-registration fees: approximately $130 - $300 per transaction, varying by state. None of these costs are hidden, but they are easy to underestimate when you are focused on the potential saving.
The expensive surprise: fixed-rate break costs
This is where refinancing can become very costly, very quickly. Banks calculate break costs using the difference between the wholesale funding rate when your loan was fixed and the current wholesale rate for the remaining term. A $500,000 loan with two years remaining and a 1.5% rate differential can produce a break cost of around $15,000 before any present-value adjustment. A $750,000 loan with three years remaining and a 1.0% differential can push past $22,500. If you are mid-fixed-term, request a break cost estimate from your lender before doing anything else. That one number determines whether refinancing is even worth exploring right now.
LMI and the 80% LVR rule
If your refinanced loan sits above 80% LVR, most lenders will charge Lenders Mortgage Insurance (LMI) again, even if you already paid it on the original loan. LMI is calculated on the full loan amount and can easily run into thousands of dollars, eroding any rate savings before they have a chance to accumulate. The practical threshold for most borrowers is 20% equity or more in the property at the time of switching. Below that, refinancing is rarely worth the cost unless the rate differential is significant.
What the switching process actually looks like:
The steps from decision to settlement
The refinancing process is more straightforward than most people expect. Your Broker will compare your current rate against what is available, obtain a property valuation estimate, gather your documents (recent payslips, tax returns, and three to six months of bank statements), then apply with the new lender. The new lender pays out your existing loan, the old mortgage is discharged, and the new mortgage registers. From application to settlement, the typical timeline is two to six weeks, though this can vary depending on the lender, the valuation method, and the complexity of your application.
Where a broker changes the outcome
A broker who accesses a panel of lenders can compare dozens of products simultaneously, rather than a single bank's limited product range. That matters because the best deal for your situation, your income structure, your LVR, your loan features, will not necessarily come from your current bank or the one with the biggest advertising budget.
April Six is led by Eshanee Collins, An experienced Broker whose background in the banking industry means she understands how lenders assess applications, what they are genuinely flexible on, and where the real value sits in the current market. A refinance review with April Six runs your actual numbers and tells you clearly whether switching makes financial sense for your specific situation.
The smartest refinancing decision isn't always to switch
Refinancing is not always the right move.
Sometimes the best outcome of a review is confirmation that staying put is the smarter choice right now, because the break costs are too high, the equity is not there yet, or the rate gap does not justify the effort. That is a useful answer too. But if you are asking "when is the best time to refinance my mortgage?" and the signals are there, a meaningful rate gap, solid equity, two or more years in the loan, and switching costs that break even quickly, then waiting can cost you a lot of money every single month. The checklist in this guide is a useful starting point.
April Six offers a no-obligation refinance review. It is worth one conversation to find out whether the loan you are in is still the right one.
Click here to chat to Eshanee
*Any information or advice contained in sidering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.
April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253 | Credit Representative Number 554762.*
Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.