Refinancing gets talked about as though it is always worth doing, and it is not. It is worth doing when the benefit clears the cost by a sensible margin, or when something other than the rate makes it necessary. The rest of the time it is effort for very little.

Here is how to tell which situation you are in.

The reasons that are not about rate

Rate gets the attention, but in practice a good share of refinances happen for other reasons entirely:

  • Releasing equity to fund a renovation, an investment deposit or a business purchase.
  • Restructuring — splitting loans, adding an offset, or separating investment debt from owner-occupier debt so the accounting is clean.
  • A fixed term ending, where the loan is about to roll onto a revert rate that was never intended to be competitive.
  • Consolidating higher-cost debt into the mortgage — cheaper monthly, though it stretches short-term debt over a long term, which deserves care.
  • Removing or adding a borrower after a change in circumstances.

Several of these have nothing to do with saving money month to month, and they are often the more valuable ones.

The costs that eat the saving

A refinance is a new loan application, and it carries real costs:

  • Discharge and settlement fees from the outgoing lender.
  • Application, valuation and settlement fees at the new lender, though these are often waived as part of an offer.
  • Break costs if you are on a fixed rate. These are not a flat penalty — they are calculated on the lender's loss and can be substantial. Always get the figure in writing before deciding.
  • Lenders Mortgage Insurance again. This is the one that catches people. LMI is not portable between lenders. If your equity is still below the threshold, refinancing can mean paying it a second time — which will usually outweigh any rate saving on its own.

The break-even question

The useful framing is simple: total cost to switch, divided by the monthly saving, gives the number of months to break even. If you would comfortably still be in the loan well past that point, the switch is probably worth it. If break-even lands years out, or past when you might sell, it is not.

It is worth comparing the whole cost of the loan rather than the headline rate alone — annual fees, offset arrangements and the gap between an introductory rate and what it reverts to all matter.

When staying put is the better call

  • The balance is small or the loan is close to finishing. There is not enough interest left for a rate difference to matter.
  • Your equity position has not moved and you would trigger LMI again.
  • You have had a recent credit event — a missed payment, a new default, a change of employment. Requalifying at the wrong moment can mean a worse outcome than the loan you have.
  • Your income has changed downward. Refinancing means passing today's serviceability test, not the one you passed originally.
  • Your existing lender will match it. Frequently they will, and a repricing request costs nothing.

That last point is worth pausing on. Asking your current lender to reprice is the cheapest option available and works often enough to try first.

You have to requalify

A refinance is assessed like any new loan. Income, expenses, existing debts and the property's current valuation all get looked at afresh, against today's assessment rate — not the one that applied when you first borrowed.

For most people this is routine. It matters most if your circumstances have changed since — a move to self-employment, a new dependant, or a valuation that has not moved the way you assumed. Worth checking before you start, which we cover in our guide to borrowing capacity.

A reasonable rule of thumb

Review the loan every couple of years, and whenever something changes — a fixed term ending, a renovation being considered, an investment purchase, or a shift in income. Loans set up years ago frequently sit well away from what the same borrower would be offered today, and the equity position has usually moved too.

A review costs nothing. Acting on it is a separate decision, and sometimes the right answer is to leave things exactly as they are.

Talk to a Sabea broker and we will tell you honestly whether switching is worth it — including when it is not.

General information only. It does not take your objectives, financial situation or needs into account, and it is not credit or financial advice. Lender policy, rates and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here.