When should I refinance my home loan in Sydney?

If you're a homeowner in Sydney, you've probably noticed that Australian interest rates are at a 11-year high. This has led to a surge in refinancing, with figures reaching $19.1 billion in December 2022. But what does this mean for you? Should you jump on the bandwagon and refinance your home loan too? Let's dive into it.

Refinancing, in simple terms, is when you replace your current home loan with a new one under different terms. This could be to get a better interest rate or access the equity in your home.

The benefits of refinancing can be great. You could save money, pay off your home loan sooner, get better loan features, and have more flexibility. Plus, if your home has increased in value, you could access that extra equity. But it's not a one-size-fits-all solution. It's important to consider your individual circumstances and crunch the numbers to see if it's the right move for you.

Interest Rates

Now, let's talk about interest rates. These little percentages can have a big impact on your home loan. The current interest rate for the big banks are similar, but you might find lower rates at smaller banks or credit unions. It's worth noting that this is a comparison rate, which includes both the interest rate and all the fees associated with the loan. This gives you a more accurate picture of the true cost of the loan.

But what about the 'loyalty tax'? This is a term used to describe the higher rates that loyal customers often end up paying. It might seem counterintuitive, but sometimes switching lenders can get you a better deal. It's worth shopping around to see if you could get a better deal elsewhere.

Fixed vs Variable Home Loans

When it comes to the type of home loan, you've got a couple of options. Fixed home loans offer a static interest rate for a set period, which can be great for budgeting. But some people prefer a mix of fixed and variable rates, which can offer a bit more flexibility. 

If the thought of switching lenders and going through the refinancing process makes you break out in a cold sweat, there might be another option. You could try negotiating a better deal with your current lender. This could potentially avoid the refinancing process and any associated fees

When is the Right Time to Refinance?

This depends on a few factors. You'll need to consider the current interest rates, your personal circumstances, and the potential savings. It's also important to factor in closing costs associated with refinancing, which can include an origination fee, appraisal fee, title insurance fee, and credit report fee. You'll need to calculate your break-even point to determine if refinancing is worth it. This is the point at which the savings from the new loan outweigh the costs of refinancing.

Refinancing can be a great move, but it's not for everyone. It's important to do your homework and make sure it's the right decision for you. And remember, a high credit score (760 or more) is usually needed for the best interest rates. If your credit score is low, you may want to raise it first before refinancing. Keep paying those bills on time to increase your credit score.

In the current market, it could be an optimal time to refinance in Australia. But remember, every situation is unique. So, take the time to consider your options, do your research, and make the decision that's right for you. After all, it's your home and your money – make it work for you.

Refinancing Involvement

Refinancing is not a one-size-fits-all solution. It involves replacing your current home loan with a new one, often with a different lender. The primary goal is to secure a lower interest rate, but other benefits can include accessing equity, gaining better loan features, and reducing the loan term.

However, it's not all sunshine and rainbows. Refinancing can come with potential drawbacks, such as the 'loyalty tax' for sticking with your current lender, or the fees associated with switching to a new one. It's crucial to weigh these pros and cons before making a decision.

Average Refinancing Time Frame

The average refinancing time frame is around 38-48 days. However, this can vary depending on factors such as the complexity of your financial situation, the efficiency of your lender, and the current demand for refinancing, which can cause delays. To manage this, try to get your paperwork in order as soon as possible and maintain open communication with your lender. You can also use a mortgage broker who can help streamline the process.

Understanding Closing Costs

Closing costs are the fees you'll need to pay when finalising your new loan. These can include the origination fee, appraisal fee, title insurance fee, and credit report fee. To determine if refinancing is worth it, calculate your potential savings and compare them to these expected costs. This will give you your break-even point - the point at which the savings from your new loan will start to outweigh the costs of refinancing. Some banks may offer a cashback of thousands of dollars to entice you to switch to them. In these cases, it is often worthwhile to refinance. If you speak to a good mortgage broker, they can help you access the best deals when refinancing.

Role of Credit Scores

Your credit score plays a significant role in your refinancing potential. Generally, a high credit score (760 or more) will get you the best interest rates. But don't despair if your score is lower. There are strategies you can use, such as improving your credit score before applying, shopping around for the best rates, or considering government-backed loans which often have more lenient credit requirements.

The Current Competitiveness of the Australian Market

The Australian market is currently ripe for refinancing. With interest rates at a 11-year high and property values increasing, there's a lot of competition among lenders. This can work in your favour, as lenders may offer lower rates or better terms to attract customers. However, it's essential to do your research and not just go with the first offer you see.

Access to Equity

Refinancing can also allow you to access your home's equity - the difference between your property's value and the amount you owe on your loan. This can be a great way to fund renovations, invest in other properties, or consolidate debt. To calculate your equity, subtract your loan balance from your home's current market value.

Is it the perfect time to refinance?

Determining the perfect time to refinance is a personal decision. It depends on factors such as your current interest rate, the potential savings from refinancing, your financial goals, and the current market conditions. As a general rule, if you can reduce your interest rate by at least 1%, it might be worth considering. However, it's always a good idea to consult with a financial advisor and a mortgage broker before making any major decisions.


Refinancing your home loan can be a smart financial move, but it's not for everyone. It's important to understand the process, the potential costs, and the impact of your credit score. The current competitive market in Australia presents opportunities for those considering refinancing, especially if you're looking to access equity. However, it's crucial to do your homework, calculate your potential savings, and consider your individual circumstances before deciding if it's the perfect time to refinance.

About the author 

Harold Simmons

Harold is the founder and creator of the Asset Owners Discussion Project. He creates quality resources so investors can get access to information they wouldn't normally be able to access. He has been investing in real estate for almost three decades and is particularly experienced with mortgages and refinancing.

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