Understanding the basics of when to refinance

When your fixed rate period ends

Your lender's revert rate is almost always higher than the discounted rate you could access by switching lenders or renegotiating. Most fixed rates expire onto variable rates that sit 0.50% to 1.00% above what new borrowers are offered, which adds up quickly on larger loan amounts.

Consider an ADF member in Darwin whose three-year fixed term ended last quarter. Their loan amount sat at $480,000, and the revert rate from their lender was 6.45%. By refinancing to a lower rate of 5.95% through a different lender, they reduced their monthly repayment by around $250. Over the remaining loan term, that difference compounds into significant interest savings without requiring any change to their financial situation.

If you're coming off a fixed rate in the next three months, request a comparison from your broker now rather than waiting until the expiry date. Lender approval and settlement take four to six weeks, and leaving it until after your fixed term ends means you'll be paying the higher revert rate while your refinance processes.

When you need to access equity

Refinancing lets you release equity built up in your property without selling it. Most lenders will allow you to borrow up to 80% of your property's current value without paying Lenders Mortgage Insurance, which means any equity above that threshold can be accessed through a refinance application.

ADF members posted to Robertson Barracks or RAAF Base Darwin often look at accessing equity for investment property purchases in their home states. If your Northern Territory property has increased in value since you purchased it, or if you've paid down a portion of the loan amount, that equity can form the deposit for your next purchase. The refinance process includes a property valuation, which determines how much equity you can unlock without triggering additional insurance costs.

Timing matters when you're planning to buy another property. Start your refinance application at least eight weeks before you want to make an offer, so your borrowing capacity is confirmed and your equity is accessible when you find the right property. Waiting until you've found something you want to buy creates unnecessary pressure and limits your ability to act quickly in a competitive market.

When your loan no longer suits your situation

Your financial position changes over time, and your mortgage should adapt to match. A loan that worked well three years ago might now be costing you money or limiting your options because the features no longer align with how you manage your finances.

Offset accounts and redraw facilities both reduce the interest you pay, but they function differently. An offset account sits alongside your loan and reduces the balance on which interest is calculated, while redraw lets you withdraw extra repayments you've made. If your current loan doesn't include an offset account and you're keeping savings in a separate transaction account earning minimal interest, refinancing to a loan with offset functionality puts those savings to work reducing your mortgage interest instead.

Some ADF members refinance to consolidate other debts into their mortgage. If you're carrying personal loan or car loan debt at rates above 8.00%, folding that into your home loan at a lower interest rate reduces your overall repayments and simplifies your finances to a single monthly payment. The trade-off is that you're securing previously unsecured debt against your property, so this approach works when you're confident in your repayment capacity and the consolidation genuinely improves your cashflow.

When you've been stuck on a high rate for more than 12 months

Interest rates dropped significantly for new borrowers over the past 18 months, but existing customers don't automatically receive those reductions. If you haven't reviewed your loan in over a year, there's a strong chance you're paying more than you need to.

Run a loan health check to compare your current interest rate against what's available now. If the difference is 0.40% or more, refinancing is worth the effort. On a loan amount of $400,000, a 0.50% reduction saves roughly $2,000 per year in interest, which offsets any application or discharge fees within the first 12 months.

Your existing lender might offer a retention rate if you mention you're considering a switch, but those offers are often still higher than what you'd access by moving to a new lender. Retention rates also tend to revert after 12 months, putting you back in the same position next year. Moving to a lender with consistently lower rates gives you a longer-term solution rather than a temporary discount.

When you want to switch between fixed and variable

Variable interest rates give you flexibility to make extra repayments and access features like offset accounts, while fixed rates lock in your repayment amount and protect you from rate increases. Your preference between the two will depend on whether rates are rising, falling, or stable, and whether you value certainty over flexibility.

If variable rates have dropped and you're currently on a fixed rate with more than 12 months remaining, breaking your fixed term early usually incurs break costs. Those costs are calculated based on the difference between your fixed rate and the current wholesale rate your lender uses to fund fixed loans. Break costs can run into thousands of dollars, so switching early only makes sense if the interest savings over the remaining fixed period exceed the break cost. Your broker can request a break cost estimate from your lender before you commit to refinancing.

Moving from variable to fixed makes sense when you expect rates to rise or when you want predictable repayments for budgeting purposes. ADF members in the Northern Territory who are planning to take on additional commitments like investment property purchases or major expenses often fix a portion of their loan to ensure their primary mortgage repayment remains stable while they manage the new financial commitment.

Call one of our team or book an appointment at a time that works for you. We'll assess your current loan, confirm what rates and features you can access, and handle the refinance process from application through to settlement.

Frequently Asked Questions