Is Refinancing Right for You?

Refinancing makes sense if it results in a clear financial benefit. However, it’s not always the best move for everyone. Here’s what to consider:

When to Refinance

• Interest rates have dropped by at least 0.5% since you took out your mortgage.
• You want to switch from a variable to a fixed rate or vice versa.
• You're approaching the end of a fixed rate period and looking to lock in new terms.
• Your property value has increased, boosting your equity.
• You’re adding or removing a co-borrower.

When to be cautious

• The costs of refinancing (application fees, valuation, legal fees) outweigh the benefits.
• You plan to sell your property soon.
• You’re considering a lengthy period before seeing savings.

Important: Timing & Costs

Refinancing typically involves costs, such as:

• Break costs: if you are still within a fixed-rate period.
• Application and valuation fees: usually between $300-$600.
• Legal and settlement costs: approximately $1,000-$2,000.
• Some lenders charge a discharge fee when paying out your old loan.

In my experience, refinancing is often worth considering if you can save at least one full percentage point in interest rate or reduce monthly payments significantly.

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The Refinancing Process in Australia

Refinancing may seem complex, but it follows a clear pathway:

Step 1: Assess Your Goals and Budget

Decide what you want to achieve—lower payments, better features, or access to cash. Review your financial situation and consider how refinancing fits your long-term plans.

Step 2: Check Your Eligibility

Lenders will evaluate:

• Income and employment stability
• Deposit sources: savings, gift, overseas income
• Property value: recent valuation may be required
• Credit history: a good score helps
• Visa status: most lenders prefer permanent residents or citizens; some options exist for temporary visa holders

"In my experience, demonstrating stable income and a good credit history improves chances of approval."

Step 3: Shop Around

Compare interest rates, features, fees, and lender reputations. Use a mortgage broker if you want expert guidance. Brokers can access multiple lenders, including those catering to international buyers.

Step 4: Submit Application

Provide:

• Proof of income (payslips, tax returns)
• Identification documents
• Property details and valuation report
• Evidence of deposit sources

Step 5: Valuation & Approval

The lender will arrange a property valuation. If approved, they will issue a formal offer. Review the terms carefully before proceeding.

Step 6: Settlement & Discharge

Your old loan is paid out, and your new loan begins. You may need to pay settlement costs. Your broker or solicitor can help manage this process.

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Common Concerns and FAQs

Can I refinance if I have a low deposit?

Yes, but it depends on the lender’s requirements. Most lenders prefer a deposit of at least 5% of property value, though lenders mortgage insurance (LMI) applies if below 20%. Make sure you have the necessary funds for LMI and fees.

How do I source my deposit if I’m an international buyer?

You may use overseas savings, family gifts, or proceeds from a property sale abroad. Transfer limits and source verification are important. Many lenders ask for documentation proving where your deposit funds came from.

What about Lenders Mortgage Insurance (LMI)?

LMI protects the lender if you default and is usually paid upfront or rolled into the loan. It applies if your deposit is less than 20%. Some lenders offer lenders mortgage insurance options for foreign investors.

Are there restrictions for temporary visa holders?

Most lenders prefer permanent residents or citizens. However, some lenders provide options for temporary visa holders with proper documentation. Check with lenders about visa eligibility and FIRB approval if required.

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Final Thoughts

Refinancing can save you money, free up cash, or give you better loan features. But it’s important to evaluate costs versus benefits carefully. Always compare different options and consult professionals to ensure the best outcome.

Remember, “Refinancing is not just about lowering rates; it’s about aligning your mortgage with your financial goals,” as I often advise my clients. Whether you’re paying off your first home or managing a portfolio, strategic refinancing can be a key to long-term financial security.

If you're considering refinancing, start by assessing your current situation and then explore the options that best fit your needs. With the right approach, you can optimize your mortgage and build a stronger financial future.