Simple hacks to save thousands refinancing your home loan

Refinancing is moving your home loan to a different lender or changing your loan structure with your current lender to access a lower rate, release equity, or adjust your loan features.

Most property owners in Montrose sit on the same loan for years without checking whether it still works for them. Rates shift, lenders adjust their pricing, and your financial position changes. A loan that made sense three years ago might be costing you thousands more than it should today.

How refinancing saves you money

Refinancing to a lower rate reduces the interest you pay each month and over the life of your loan. If you are paying 6.2% and can access a rate of 5.7%, the monthly saving on a loan amount of $600,000 is around $180. Over five years, that compounds to more than $10,000 in interest saved without changing your repayment schedule.

In our experience, clients refinance when they realise their current lender is not moving on rate even when the market is. Lenders compete hard for new customers but rarely offer existing borrowers the same pricing. We regularly see this with clients coming off a fixed rate period and moving to a variable rate that sits well above what new borrowers are offered at the same lender.

A home loan health check gives you a clear view of where your current rate sits compared to what is available. If the gap is more than 0.3%, the potential saving usually justifies a refinance application once you account for any exit or switching costs.

When your fixed rate period ends

When a fixed rate expires, your loan reverts to your lender's standard variable rate unless you take action. Standard variable rates are almost always higher than the rates advertised to new customers. If your fixed rate was 2.8% and you revert to a standard variable rate of 6.5%, your monthly repayment can jump by $800 or more on a loan amount of $500,000.

Consider a property owner in Montrose who fixed at 2.5% in early 2021 and came off that rate in mid-2024. Their lender's reversion rate was 6.8%. Rather than accept that rate, they applied to refinance six weeks before their fixed term ended. The new lender offered 5.9%, and the application settled two weeks after the fixed period expired. The rate difference of 0.9% saved them around $375 per month, or $4,500 per year.

Timing matters. Start the refinance process at least 60 days before your fixed rate expiry to allow for valuation, credit assessment, and settlement. Lenders will not process your application if your fixed term has more than 90 days remaining, so the window is narrow.

Accessing equity without selling

Refinancing lets you access equity that has built up in your property without selling it. Equity is the difference between your property's current value and what you owe on your mortgage. If your home is now worth more than when you bought it, or if you have paid down your loan balance, that equity can be released and used for other purposes.

Property values in Montrose and surrounding areas like The Basin and Ringwood East have shifted over the past few years. If you bought in Montrose before 2020, your property may have appreciated enough to release equity for an investment property deposit, a renovation, or debt consolidation. Lenders typically allow you to borrow up to 80% of your property's current value without paying lender's mortgage insurance, so if your property has increased in value or your loan balance has reduced, that 80% threshold may now be higher than your current loan amount.

As an example, a client owned a property valued at $850,000 with a remaining loan balance of $480,000. At 80% of the property's value, they could borrow up to $680,000. They refinanced to access $150,000 in equity for a deposit on an investment property, increasing their total loan amount to $630,000 while staying within the 80% lending limit. The interest rate on the new loan was 5.8%, lower than their previous rate of 6.1%, so even with the higher loan amount, their monthly repayment only increased by around $320.

Consolidating debt into your mortgage

If you carry balances on credit cards, car loans, or personal loans, refinancing can consolidate that debt into your home loan at a lower interest rate. Credit card rates often sit between 12% and 20%, while home loan rates are currently closer to 6%. Moving high-interest debt into your mortgage reduces your monthly repayments and simplifies your finances into a single payment.

Debt consolidation works when the interest saving outweighs the cost of extending the repayment term. A car loan with three years remaining at 8.5% costs more per month than the same balance added to a home loan at 6% over 30 years, but stretching the term means you pay more interest overall unless you increase your repayments once the consolidation is complete. We walk through that calculation with every client so the decision is based on numbers, not convenience.

Montrose homeowners who have paid down their mortgage over ten or fifteen years and built up equity can use refinancing to clear short-term debt and improve cashflow without taking on a second loan product. The refinance application includes a credit check, so your current debt levels and repayment history will be assessed as part of the approval.

Switching between fixed and variable rates

Refinancing also allows you to switch from a variable rate to a fixed rate, or the reverse, depending on where you think rates are heading and what structure suits your circumstances. Fixed rates lock in your repayment for a set term, usually between one and five years. Variable rates move with the market and give you access to features like offset accounts and redraw without restriction.

If you are currently on a variable rate and expect rates to rise, fixing part or all of your loan can protect you from repayment increases. If you are on a fixed rate and rates have dropped, refinancing to a variable product or a new fixed rate at a lower level can reduce your repayments immediately.

Some clients split their loan, fixing a portion and leaving the rest variable. That structure gives you rate protection on part of the loan and flexibility on the rest. A split lets you make extra repayments on the variable portion while keeping the fixed portion stable. The right structure depends on your income, your tolerance for rate movement, and whether you plan to make lump sum repayments over the next few years.

The refinance process and what it costs

The refinance application follows the same steps as a new home loan. You provide income evidence, a current valuation is ordered, the lender assesses your borrowing capacity, and the new loan settles once contracts are signed. The process typically takes three to five weeks from application to settlement if your documentation is in order.

Costs include a property valuation, which is usually between $200 and $400, discharge fees from your current lender, which range from $150 to $500, and government charges for registering the new mortgage, typically around $120 to $200 in Victoria. Some lenders cover the valuation and offer cashback incentives to offset switching costs, but those offers change regularly and should be weighed against the ongoing rate and features of the loan.

If you are still within a fixed rate period, you may also face break costs, which are calculated based on the difference between your fixed rate and the lender's current cost of funds. Break costs can run into the thousands if rates have dropped significantly since you fixed. We calculate break costs before recommending a refinance so you know the total cost before proceeding.

What lenders look for in a refinance application

Lenders assess refinance applications using the same serviceability criteria as new loans. They review your income, existing debts, living expenses, and credit history. If your income has increased or your debts have reduced since you took out your current loan, your borrowing capacity may have improved. If your circumstances have changed in the other direction, such as reduced hours or additional dependents, that will affect what you can borrow.

Property valuation is central to the refinance process. Lenders use a current valuation to determine how much they are willing to lend. If your property has increased in value, you may be able to borrow more or avoid lender's mortgage insurance. If your property has declined in value or the valuation comes in lower than expected, your borrowing capacity may be reduced.

Montrose sits within the Shire of Yarra Ranges, where property types range from older weatherboard homes on larger blocks to more recent builds on subdivided lots. Valuation outcomes can vary depending on recent comparable sales, and lenders may be more conservative on properties with non-standard features or on larger rural-zoned blocks. If you are refinancing a property with land over 2,000 square metres or with a unique build, expect the lender to request a full valuation rather than relying on automated models.

Choosing the right loan structure and features

Refinancing is not just about the interest rate. Loan features like offset accounts, redraw facilities, and repayment flexibility affect how much you pay over the life of the loan and how you manage your cash. An offset account is a transaction account linked to your home loan where the balance reduces the interest charged on your loan. If you have $30,000 in your offset and owe $500,000, you only pay interest on $470,000.

Redraw lets you access extra repayments you have made on your loan, but the lender controls when and how much you can withdraw. Some lenders limit redraw to minimum amounts or charge fees. Offset accounts give you immediate access to your funds without restrictions, which is why they are preferred by clients who maintain a cash buffer or run a business.

If you plan to hold your property long-term and make extra repayments, a variable loan with a full offset account usually delivers the most flexibility. If rate certainty is your priority and you do not need to make large extra repayments, a fixed rate without an offset can work, but you give up access to those features for the fixed term.

Call one of our team or book an appointment at a time that works for you. We will run the numbers, check what you are eligible for, and make sure the refinance saves you money before you commit to the process.

Frequently Asked Questions