Most people refinance to cut their interest rate, but that's only part of the picture.
After 16 years of arranging finance for self-employed clients and others across Australia, I've seen refinancing deliver genuine savings when the numbers stack up and the timing is right. I've also seen people move too early or too often, paying more in fees than they save in interest. The difference comes down to understanding what you actually need from the loan and whether a new lender can deliver it without costing you more in the process.
Refinancing isn't about chasing the lowest advertised rate. It's about matching your current financial position to a loan structure that reduces costs, improves cashflow, or gives you access to capital when you need it. For self-employed borrowers especially, refinancing can also mean switching to a lender that values your income structure rather than penalising it.
Why Refinancing Can Reduce Your Loan Costs
Refinancing to a lower rate reduces the interest portion of each repayment, which means more of your payment goes toward the principal.
Consider a client with a $450,000 mortgage on a variable rate of 6.2%. They were paying around $2,800 per month in interest alone. After refinancing to a lender offering 5.7%, that interest component dropped to roughly $2,500 per month. Over a year, that's $3,600 staying in their offset account instead of going to the bank. They didn't change their repayment amount, so the extra $300 each month accelerated their loan reduction. The refinance cost them $1,200 in fees, which meant they were ahead within five months.
That scenario works because the rate difference was large enough and the loan balance was high enough to justify the switch. If the rate difference had been 0.2% instead of 0.5%, the monthly saving would have been closer to $40, and it would have taken two years just to recover the application costs. That's where a loan health check becomes useful before you commit to anything.
When a Fixed Rate Period Ends
When your fixed term expires, your loan typically moves to the lender's standard variable rate, which is often higher than what new borrowers are offered.
This is one of the most common triggers for refinancing, and it's often the most financially sound. Lenders don't reward loyalty. If you're rolling onto a standard variable rate above 6%, and another lender is offering new customers 5.6%, you're paying roughly $150 per month more on a $400,000 loan for no reason other than inertia. We regularly see self-employed clients coming off fixed rates who were locked in during a low-rate period and are now facing a jump of 2% or more when they revert to variable. That's a significant cashflow hit, especially when trading conditions are uneven.
If your fixed rate expiry is approaching, start the refinance process at least eight weeks beforehand. Lenders need time to assess your application, and if you're self-employed, they'll want recent financials and possibly an updated accountant's letter. Leaving it until after you've already rolled onto the higher rate means you're paying that rate while the new loan is being processed.
Accessing Equity Without Selling
Refinancing allows you to borrow against the increased value of your property without selling it.
This is particularly relevant for clients looking to fund a deposit on an investment property, renovate, or inject capital into a business. If your property has increased in value since you purchased it, and you've paid down some of the loan, you may have usable equity that can be released through a refinance. Lenders will typically allow you to borrow up to 80% of the property's current value without requiring mortgage insurance, though some will go higher depending on your profile.
In a scenario like this, a client owned a property in Adelaide's inner south that had appreciated from $620,000 to $720,000 over four years. Their loan balance was down to $380,000. They refinanced to borrow $576,000, which is 80% of the new valuation. That gave them $196,000 in cash, minus refinance costs. They used $140,000 as a deposit on a second property and kept the rest as a buffer for the fit-out of a commercial premises they were leasing. The new loan had a slightly higher rate than their existing one, but the ability to access equity without selling or disrupting their business made the move worthwhile.
If you're considering this approach, make sure the additional borrowing still fits within your serviceability. Lenders will assess your ability to repay the larger loan amount based on your current income, and if you're self-employed, that means they'll be looking closely at your tax returns and business activity statements.
Consolidating Debts Into Your Mortgage
Moving high-interest debts into your home loan can reduce your overall interest expense and simplify your monthly commitments.
Credit cards, car loans, and business overdrafts often carry rates between 8% and 20%, while mortgage rates sit closer to 5% to 6%. Refinancing to roll those debts into your home loan converts short-term, high-cost debt into long-term, lower-cost debt. The monthly saving can be substantial, particularly if you're carrying balances across multiple accounts.
The downside is that you're now paying off that debt over 25 or 30 years instead of three to five, so the total interest paid can be higher unless you make extra repayments to clear it faster. This strategy works if your goal is to improve cashflow in the short term or if you're confident you'll use the breathing room to stabilise your finances rather than accumulate more debt. We've seen this approach work well for self-employed clients who've had a tough trading year and need to reduce their monthly outgoings until revenue picks up.
Switching Loan Features to Match Your Needs
Refinancing can also give you access to features your current lender doesn't offer, like an offset account, redraw facility, or the ability to split your loan between fixed and variable.
An offset account can be particularly valuable if you run a business or have irregular income. Every dollar sitting in the offset reduces the interest charged on your loan, without locking that money away. If your current lender doesn't offer offset accounts or charges a high annual fee for one, refinancing to a lender with a no-fee or low-fee offset can improve your cashflow and give you more control over your repayments.
Redraw facilities let you access extra repayments you've made, but not all lenders handle redraw the same way. Some allow instant online access, others require a formal application and processing time. If you're self-employed and might need to pull funds out quickly for a business opportunity or an unexpected cost, the speed and flexibility of redraw matters. Refinancing to a lender with more responsive systems can make a practical difference, even if the rate isn't dramatically lower.
How the Refinance Process Works
The refinance process involves submitting a new loan application, undergoing a property valuation, and settling the new loan to pay out the old one.
You'll need to provide proof of income, recent bank statements, and details of your existing loan. If you're self-employed, expect to supply two years of tax returns, business financials, and possibly a letter from your accountant confirming your income. The lender will arrange a valuation of your property, which can be done as a desktop assessment or a physical inspection depending on the loan amount and location.
Once the new loan is approved, your broker will coordinate the settlement, which involves the new lender paying out your existing loan and registering the new mortgage. The process typically takes four to six weeks from application to settlement, though it can be faster if your documents are in order and the valuation comes back quickly. You'll need to factor in application fees, valuation fees, and potentially discharge fees from your current lender. These usually total between $800 and $1,500, depending on the lenders involved.
If you're thinking about whether a refinance home loan makes sense for your situation, the starting point is working out what you're paying now, what you could be paying elsewhere, and how long it will take to recover the cost of switching.
Call one of our team or book an appointment at a time that works for you. We'll run the numbers, look at your current structure, and show you whether refinancing will leave you ahead or whether you're already in a reasonable position.
Frequently Asked Questions
What is the main reason people refinance their home loan?
Most people refinance to reduce their interest rate, which lowers the interest portion of each repayment and can save thousands over the life of the loan. Refinancing is also used to access equity, consolidate debts, or switch to a loan with features that suit their current financial situation.
How long does the refinance process take?
The refinance process typically takes four to six weeks from application to settlement. The timeline depends on how quickly you can provide documentation, how long the property valuation takes, and the lender's processing times.
What fees are involved in refinancing a mortgage?
Refinancing usually involves application fees, valuation fees, and discharge fees from your current lender, which typically total between $800 and $1,500. You should calculate how long it will take for your interest savings to exceed these costs before deciding to refinance.
Can I access equity in my property through refinancing?
Yes, refinancing allows you to borrow against the increased value of your property without selling it. Lenders typically allow you to borrow up to 80% of your property's current value, and the difference between that amount and your existing loan balance can be accessed as cash.
Should I refinance when my fixed rate period ends?
Refinancing when your fixed rate ends is often worthwhile because you may roll onto a higher standard variable rate. Comparing what other lenders offer new customers can reveal whether you're paying more than necessary, and refinancing can lock in a lower rate.
