Refinance to Lower Your Rate

As a guideline, a 0.50% rate drop or more usually justifies the upfront switching cost within 8–12 months on a typical $500k loan. Below 0.40%, the breakeven stretches to 15+ months, so Andy looks at whether the new loan adds features (offset, redraw flexibility, portability) that deliver non-rate value. If your current lender is about to hike your rate at fixed-term expiry, even a 0.30% improvement through refinancing can be worth it because the alternative is staying on a revert rate 1.00–2.00% higher than competitive offers.

Yes — and Andy recommends it. Keeping the same remaining term (or shortening it) means you pay less interest over the life of the loan and own your home sooner. Lenders often default to re-amortising over a fresh 30 years when you refinance, which drops your monthly repayment but adds years of interest. Andy structures the new loan to match your remaining term (e.g. 22 years left on the old loan → 22-year term on the new loan) so the rate saving goes straight to faster principal reduction or cash flow, not extended debt.

Retention offers are common when you mention refinancing. The matched rate is often temporary (12 months) or comes with conditions (must stay 2 years or pay a clawback fee). Andy reads the fine print: is the match a fixed discount off the standard variable rate that persists, or a one-time adjustment? Does the retention package include fee waivers or feature upgrades you’d get by switching? If the retention offer genuinely matches the competitor and you’re happy with the current lender’s service and features, staying can save the switching cost. If it’s a band-aid — rate drops back after a year, no offset added, no fee waivers — refinancing usually wins.

From application to settlement, typically 4–6 weeks. Timeline breakdown: application lodged, supporting documents uploaded (1 day); valuation ordered and completed (3–7 days for desktop, 10–14 days if physical inspection needed); credit and income assessment (5–10 business days); formal approval and contract issued (1–2 days); you sign documents (1–3 days); settlement booked 7–14 days after signing. If your valuation comes back quickly and your income is straightforward PAYG, Andy’s seen Perth refinances settle in 3 weeks. If the lender requests extra documents or the valuer needs site access, add another week.

Yes, the new lender orders a valuation to confirm your property’s current market value and calculate LVR (loan-to-value ratio). Most Perth metro refinances use a desktop valuation (lender’s valuer reviews recent sales in your suburb, checks your property’s last sale price and any council records of renovations). Cost is typically $200–$400, sometimes waived as part of a refinance package. If your LVR is above 80% or the property is regional/unique, the lender may request a physical inspection, adding $200–$400 and 7–10 days to the timeline.

Standard documents: last 2–3 payslips (PAYG) or 2 years’ tax returns plus business financials (self-employed); 3–6 months’ bank statements showing savings pattern and existing loan repayments; current home loan statement (shows balance, rate, remaining term); photo ID (licence, passport). If you have investment properties or other debts, the lender wants statements for those too. Andy sends you a checklist when you start and checks everything before lodging so the application doesn’t stall on a missing document.

Yes. Self-employed borrowers typically need 2 years’ full tax returns (not just notices of assessment) plus business financials (profit & loss, balance sheet) and ABN registration proof. Some lenders accept 1 year of returns if you’ve been trading 2+ years and show strong income growth. A few low-doc lenders will refinance on 1 year’s returns plus 6 months’ BAS statements, though rates are usually 0.30–0.70% higher. Andy knows which lenders are flexible on self-employed income assessment and which tighten policy during rate-rise cycles.

Same thing — ‘refinancing’ and ‘switching lenders’ both mean paying out your current home loan with a new loan from a different lender. The new loan can be structured differently (variable vs fixed, offset added, interest-only period), but when people say ‘refinance to lower my rate’, they mean the primary motivation is the rate drop, even if they also change features. Andy uses ‘refinance’ and ‘switch’ interchangeably unless you’re staying with the same lender and renegotiating, which is rare because competitor offers nearly always beat retention packages.

The new lender runs a credit check, which shows as a hard enquiry on your credit file. One enquiry typically drops your score 5–10 points temporarily; it recovers within a few months as long as you make repayments on time. Closing your old loan and opening the new one is recorded as a loan paid out + new loan opened, both neutral events. Andy’s seen Perth borrowers worry that refinancing will damage their score permanently — it doesn’t, unless you apply with 4 lenders simultaneously (each enquiry stacks) or miss repayments during the switchover (rare, because settlement is coordinated so there’s no gap).

Yes, but your current lender will charge a break cost (also called an economic cost or early-exit fee) to compensate for the interest they lose when you leave the fixed term early. Break cost is calculated from wholesale rate movements: if rates have dropped since you fixed, the cost can be $5,000–$15,000+ on a $500k loan with 2+ years left. If rates have risen, the break cost might be zero or minimal. Andy gets a break-cost estimate from your current lender before you decide. If the break cost is $8,000 and the rate saving is $250/month, breakeven is 32 months — only worth it if you’re staying well beyond that or if the new loan adds critical features you need now.

On a $500,000 loan with 25 years remaining, a 0.50% rate drop saves approximately $150 per month or $1,800 per year. Over the remaining term, that’s $45,000 in reduced interest (assuming you keep repayments constant and pay the loan off faster). A 1.00% drop saves ~$300/month or $3,600/year — $90,000 over 25 years. Actual saving depends on your loan size, remaining term, and whether you extend the term when refinancing (don’t). Use this calculator to estimate your saving, then call Andy to compare real offers.