Before you refinance, check these 5 things
Thinking about refinancing your home loan? You’re not alone. With rates shifting and more competition in the market than ever, it’s one of the smartest money moves you can make, if you do it at the right time and for the right reasons.
But before you jump in, a little preparation goes a long way. Here are five things worth checking before you make your move.
1. Know what you’re currently paying
Sounds obvious, but many borrowers don’t actually know their current interest rate. Check your latest statement or log into your internet banking and write it down. Then compare it to what’s available in the market, including the comparison rate, which accounts for fees and gives you a more accurate picture of the true cost.
2. Understand your break costs (if you’re on a fixed rate)
If you’re currently in a fixed rate period, refinancing before it expires can come with break costs, sometimes significant ones. Your lender is required to disclose this, so ask them for a break cost estimate before you go any further.
The good news: if your fixed rate is ending soon, now is exactly the right time to start exploring your options so you’re ready to move the moment it rolls over.
3. Check your equity position
Lenders assess how much of your property you own outright — your equity — as part of a refinance application. Generally, you’ll need at least 20% equity to avoid paying Lenders Mortgage Insurance (LMI) again.
To get a rough sense of where you stand, take your current loan balance and divide it by your property’s estimated value. If that number (your Loan-to-Value Ratio, or LVR) is 80% or below, you’re in a strong position to refinance without extra costs.
Quick LVR check:
- Remaining loan balance ÷ estimated property value = LVR
- LVR of 80% or below → you’re in a great position to refinance
- LVR above 80% → talk to a lending specialist about your options
4. Make sure your financial position is in order
When you refinance, your new lender will assess your application just like they would for a new loan. That means they’ll look at your income, expenses, existing debts, and credit history.
Before you apply, it’s worth taking a quick stock of your finances:
- Have your last 2 payslips or proof of income handy
- Know your monthly living expenses and any other loan repayments
- Check your credit report for any surprises
- Avoid applying for new credit cards or personal loans in the lead-up to refinancing
Street Smart Tip: The cleaner your financial picture, the smoother your application. A little housekeeping now can make a big difference.
5. Calculate whether it’s actually worth it
Refinancing has upfront costs, discharge fees from your current lender, government fees, and potentially valuation costs. The key question is: how long will it take to recoup those costs through your savings on repayments?
This is called your ‘break-even point’ and it’s worth calculating before you commit. For example, if refinancing saves you $200 a month but costs $1,500 upfront you’ll break even in about 7–8 months, anything beyond that is pure saving.
Use our online calculator at easystreet.com.au/tools/calculators to crunch the numbers for your situation.
Ready to make your move?
If you’ve worked through these five checks and you’re ready to explore refinancing, Easy Street makes it simple. Straightforward home loan options, no ongoing fees, and the same competitive rates for owner-occupiers and investors alike.
You can apply online at easystreet.com.au or give our team a call on 1300 13 14 65 — our Mortgage Specialists are ready to help.