Refinance your home loan

Refinancing your home loan can be a smart move—but only if it aligns with your financial goals. For many Australian homeowners, refinancing is a way to reduce repayments, secure a better interest rate, or take advantage of features their current loan doesn’t offer. But how do you know if it’s the right time for you? Let’s break it down in simple terms.

Refinancing means replacing your current home loan with a new one—either with your existing lender or a new one. The goal is to improve your financial situation, whether that’s through lower interest rates, different loan features, or accessing the equity you’ve built in your home.

3.1 You want a lower interest rate

If interest rates have dropped or your credit profile has improved, refinancing could help you lock in a better rate. Even a small difference in interest can save you thousands over the life of your loan.

3.2 You’d like to lower your monthly repayments

By refinancing into a new 30-year term, your monthly repayments may become more manageable. This can ease your cash flow, though you might end up paying more interest overall.

3.3 You’re aiming to pay off your loan sooner

Some borrowers refinance into a shorter loan term, such as 15 or 20 years, to own their home sooner and reduce the total interest paid.

3.4 Your current loan doesn’t suit you anymore

If your loan lacks features like an offset account, redraw facility, or flexibility in repayments, refinancing can give you access to a better loan structure.

3.5 You’re looking to consolidate debts

If you’ve got credit card debts, personal loans, or car loans, refinancing them into your home loan could simplify your finances and reduce your overall interest rate.

3.6 You need to access equity for renovations or investments

If your property has increased in value, you might be able to tap into your equity and use those funds for home improvements or investment opportunities.

While refinancing can offer significant benefits, it's important to weigh the pros and cons:

- Upfront Costs: Application fees, valuation costs, and lender discharge fees may apply. If your loan is above 80% of the property value, you might need to pay Lenders Mortgage Insurance (LMI) again.
- Longer Loan Term: Restarting a 30-year term can reduce monthly repayments but increase the interest paid over the long run.
- Break Costs: If you’re breaking a fixed-rate loan early, check for any penalties or exit fees.

Changing Lending Criteria: Your financial situation, employment type, or the property's value could impact your ability to refinance.

It all comes down to your personal goals. Are you trying to save money, reduce financial stress, or make your homework harder for you?

At Capital Connections Finance, we take the time to understand your current loan structure and what you’re trying to achieve. We’ll compare options across a panel of lenders and guide you toward the one that makes the most sense—whether it's saving on interest, freeing up cash flow, or paying off your loan faster.

6.1 Fixed-rate break costs

If you’re currently on a fixed-rate mortgage, one of the biggest potential penalties is a break cost. This fee is charged if you decide to refinance or pay out your fixed loan before the fixed period ends.

The amount varies depending on:

- How much time is left on your fixed term
- The interest rate you locked in
- Current market rates

Tip: Always request a break cost estimate from your lender before refinancing a fixed-rate loan.

6.2 Loan discharge fees

When you exit your current home loan, your lender will likely charge a discharge or exit fee. This is a standard administrative cost for closing the account and preparing the legal release of the mortgage. Most lenders charge between $200 to $400.

6.3 Upfront fees on the new loan

While some lenders offer fee-free refinancing or cashback incentives, others may charge:

- Application fees
- Valuation fees
- Legal or settlement fees

Before refinancing, ask the new lender for a full fee breakdown so there are no surprises.

6.4 Lenders Mortgage Insurance (LMI)

If your loan-to-value ratio (LVR) is over 80%, you may be required to pay LMI again, even if you already paid it on your original loan. This can be a large expense, so it’s essential to have your property revalued and check your LVR before proceeding.

6.5 Government and registration charges Each state and territory in Australia charges a mortgage registration fee when you refinance with a new lender. While not huge (usually under $200), it’s another cost to factor into the equation.

Refinancing your home loan is a common step many homeowners take to improve their financial position. But one question that often comes up is:
“Will refinancing damage my credit score?”

The short answer is—not significantly, and often, not at all in the long run. However, there are a few things you should know before making the move.

7.1 Credit checks are part of the process

When you apply to refinance your mortgage, the lender will carry out a credit enquiry to assess your financial history. This is known as a hard enquiry, and it’s recorded on your credit file.

Now, while a single enquiry won’t cause major harm, multiple applications within a short timeframe might lower your score slightly. Lenders could interpret this as a sign of financial stress.

Tip: Instead of applying with several lenders, consider working with a mortgage broker who can recommend the most suitable option the first time—minimising unnecessary credit hits.

7.2 Closing one loan and opening another

When you refinance, your original loan is paid out and a new loan is set up. This will be reflected on your credit report. But don’t worry—this process alone doesn’t lower your credit score. As long as you maintain on-time repayments, your score remains in good shape.

In many cases, yes—especially if you’re switching to a more competitive rate, unlocking better features, or consolidating debt. But it's important to compare the cost of refinancing with the potential savings.

At Capital Connections Finance, we help you break down these numbers and determine if refinancing will genuinely benefit your financial position.

If you’re considering refinancing but unsure about the fees involved, we can help you review your current loan, compare it with better options in the market, and calculate whether it's worth making the move.

Book a free consultation today to see if refinancing could save you money—and how to avoid unnecessary penalties.