Waiting Until Your Fixed Rate Expires
Start reviewing your refinance options at least three months before your fixed rate period ends.
Consider a member posted to Edinburgh Base whose three-year fixed rate expires in September. They contact a broker in June, which gives enough time to compare lenders, submit an application, and have settlement scheduled for the week their fixed term ends. If they had waited until August, they would likely roll onto their current lender's variable rate for at least one or two months while the new loan settles, potentially costing an extra $400 to $600 in interest during that period depending on their loan amount.
Lenders typically need four to six weeks to process a refinance application, and that assumes no delays with property valuations or document requests. When you factor in time to compare rates and structure your new loan properly, three months is the minimum lead time that keeps you in control of the transition.
Focusing Only on the Interest Rate
The advertised rate is just one component of your total loan cost.
A member refinancing a $450,000 loan might see a lender advertising a variable rate 0.15% lower than their current rate. That looks like a saving of around $675 per year. But if that loan has a $395 annual package fee, no offset account, and charges $15 per extra repayment, the actual benefit shrinks quickly. A loan with a rate 0.05% higher but a full offset account and no restrictions on extra repayments could deliver more value, particularly if you keep savings in the offset or make irregular lump sum payments when posted allowances come through.
Redraw facilities and offset accounts both reduce the interest you pay, but they work differently. Redraw holds your extra payments inside the loan, and some lenders restrict how often you can access those funds or charge fees to withdraw them. An offset account sits separately, gives you unrestricted access to your money, and reduces interest charges on the same day funds hit the account. For ADF members who receive irregular payments or might need quick access to cash during a posting, that distinction matters.
Ignoring the Real Cost of Switching
Refinancing involves upfront costs that must be recovered through interest savings.
Most lenders charge a discharge fee between $250 and $400 to close your existing loan. The new lender will arrange a property valuation, which can cost $200 to $400 depending on the property type and location. Settlement fees, title registration, and other legal costs can add another $800 to $1,200. If you are still within a fixed rate period, break costs could add thousands more depending on rate movements since you locked in.
If your total switching costs are $2,000 and your new loan saves $1,200 per year in interest, you break even after 20 months. That makes sense if you plan to hold the loan for at least three years. If you are posted to Canberra or Darwin within 12 months and will sell or refinance again, you will end up worse off. A loan health check before committing helps confirm whether the numbers actually work for your situation.
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Borrowing More Than You Need
Accessing equity during a refinance can be useful, but only if the purpose justifies the additional debt.
Releasing equity to fund a deposit on an investment property or complete a renovation that adds genuine value to your home makes financial sense. Releasing equity to consolidate consumer debts like credit cards or car loans might reduce your monthly repayments, but it converts short-term debt into a 30-year mortgage. A $15,000 car loan at 8% over five years costs around $2,400 in interest. The same $15,000 added to a mortgage at 6% over 30 years costs roughly $17,200 in interest. The monthly repayment looks lower, but the total cost is far higher.
If you do need to access equity, calculate exactly how much you need and borrow that amount. Lenders will often approve more than you request, but unused funds still accrue interest from day one.
Refinancing Too Often
Switching lenders every 12 to 18 months to chase the lowest advertised rate rarely delivers the expected benefit.
Each time you refinance, you pay discharge fees, valuation costs, and settlement fees. If those costs total $1,800 and your rate saving is $800 per year, you need to stay with the new lender for at least two years to come out ahead. Members who refinance annually are usually paying more in transaction costs than they save in interest, particularly once you account for the time spent gathering documents, signing forms, and managing the settlement process.
A more reliable approach is to review your loan every two to three years or whenever your circumstances change significantly, such as a promotion, posting, or fixed rate expiry. Between those reviews, contact your current lender or speak with a broker if you see rates dropping. Many lenders will adjust your rate without requiring a full refinance, particularly if you hold a package loan or have a strong repayment history.
Choosing a Loan That Doesn't Match Your Posting Cycle
Locking into a fixed rate without considering your next posting can leave you exposed to break costs.
A member refinancing in Adelaide with a likely posting to Townsville in two years should avoid a three or four-year fixed term. If they need to sell the property or refinance to access equity for a new purchase during that fixed period, break costs could run into thousands of dollars depending on how much rates have moved. A two-year fixed term aligns with the posting timeline and avoids that risk. Alternatively, splitting the loan between fixed and variable gives you some rate certainty while keeping a portion of the loan flexible for lump sum repayments or early exit without penalty.
Variable loans give you full flexibility to make extra repayments, redraw funds, or exit the loan at any time without break costs. That flexibility suits members who expect their income or circumstances to change within the next few years. Fixed loans suit members who want certainty and plan to stay in the property long enough to see out the fixed term.
Not Using a Broker Who Understands ADF Circumstances
ADF members have access to loan features and discounts that most civilian borrowers do not, but only if your broker knows where to find them.
Some lenders waive LMI for ADF members even on investment loan refinancing, which can save thousands if you are refinancing an investment property with less than 20% equity. Other lenders offer discounted rates or fee waivers specifically for defence personnel. If your broker is not familiar with these options, you will likely end up on a standard loan that costs more than it should.
Posting cycles, deployment income, and rental shortfalls on properties in previous posting locations are all factors that affect loan structure and serviceability. A broker who works regularly with ADF members will know how to present those details to lenders in a way that supports your application rather than raising unnecessary questions.
Most refinance mistakes come down to timing, incomplete cost analysis, or choosing a loan structure that does not match your actual circumstances. Taking time to review your options properly and speaking with someone who understands both the lending market and ADF-specific considerations will usually save more than chasing the lowest advertised rate.
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Frequently Asked Questions
When should I start looking at refinancing my home loan?
Start reviewing your refinance options at least three months before your fixed rate period ends. This gives you enough time to compare lenders, submit an application, and schedule settlement without rolling onto a higher variable rate while waiting for the new loan to settle.
What costs are involved in refinancing a home loan?
Refinancing typically involves discharge fees of $250 to $400, property valuation costs of $200 to $400, and settlement and legal fees of $800 to $1,200. If you are exiting a fixed rate loan early, break costs may also apply depending on rate movements since you locked in.
Should I choose a fixed or variable rate when refinancing?
Variable loans offer flexibility for extra repayments and early exit without break costs, which suits members expecting postings or income changes. Fixed loans provide rate certainty but may trigger break costs if you need to sell or refinance before the fixed term ends, so align the fixed period with your posting cycle.
Is it worth refinancing to access equity?
Accessing equity makes sense for purposes that add value, such as funding a deposit on an investment property or completing renovations. Consolidating consumer debts into your mortgage reduces monthly repayments but converts short-term debt into a 30-year loan, which can cost significantly more in total interest.
How often should I refinance my home loan?
Refinancing every 12 to 18 months usually costs more in transaction fees than you save in interest. A more effective approach is to review your loan every two to three years or when your circumstances change, such as a posting, promotion, or fixed rate expiry.
