If you bought your first home a few years ago, there's a good chance your interest rate doesn't reflect what's available now. Lenders often reserve their sharpest rates for new customers, which means the loan that got you into the market might not be the one saving you money today.
Refinancing means switching your home loan to a different lender or a different product with your current lender. For first-time buyers who've been in their property for a while, it's usually about accessing a lower interest rate, adding features you didn't have before, or releasing equity you've built up. It's not complicated, but it does require a bit of homework to make sure the numbers actually work in your favour.
Why Your Rate Might Not Be Working Anymore
Most first-time buyers lock in whatever loan gets them over the line. Once you've settled and life moves on, your lender isn't going to ring you up and offer a lower rate just because one exists. You're left on what's called a revert rate if your fixed period has ended, or a standard variable rate that hasn't moved in line with the market.
Consider a buyer who purchased their first property three years ago with a fixed rate that seemed reasonable at the time. That rate expires, and they roll onto a variable rate that's sitting well above what new customers are being offered by the same lender. Over the life of the loan, that difference can add up to tens of thousands of dollars in extra interest. A loan health check can show you exactly where you sit compared to current offers.
When Refinancing Actually Makes Sense
Refinancing works when the interest you save outweighs the cost of switching. Those costs include application fees, valuation fees, and sometimes discharge fees from your current lender. If you're only saving a small amount on your rate and you've got a relatively small loan balance, the upfront cost might eat into any benefit.
In our experience, refinancing starts to make sense when there's at least a 0.5% difference between your current rate and what you can access elsewhere. On a loan amount of $400,000, that's roughly $2,000 a year in interest savings. But it's not just about rate. If your current loan doesn't have an offset account or redraw facility and you've got savings sitting in a separate account earning nothing, switching to a loan with those features can improve your cashflow without changing your repayment amount.
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What Lenders Look at When You Refinance
Your situation today matters more than your situation when you first bought. Lenders will reassess your income, expenses, and the value of your property. If your property has increased in value since you bought it, that works in your favour. It reduces your loan-to-value ratio, which can unlock lower rates or remove lender's mortgage insurance if you were paying it.
Consider a scenario like this: you bought with a 10% deposit a few years back and paid LMI. Your property has since increased in value, and your loan balance has come down through regular repayments. When you refinance, the lender values your property at the current amount, and suddenly you're sitting at 75% LVR instead of 90%. That puts you in a different pricing tier, and you're no longer paying for insurance you don't need.
Lenders will also look at your current expenses more closely than they might have when you first applied. If your living costs have increased or you've taken on other debts like a car loan or credit card, that can affect how much you can borrow or whether a lender will approve your refinance application.
Fixed Rate Periods Ending
If your fixed rate period is coming to an end, now's the time to act. Most lenders let you start the refinance process up to six months before your fixed term expires, which means you can lock in a new rate without paying break costs. Waiting until after your fixed period ends and rolling onto a higher variable rate can cost you while you're sorting out a new loan.
When a fixed rate expires, your lender will automatically move you to their standard variable rate. That rate is almost always higher than what you'd get if you shopped around or even negotiated with your current lender. If you've been on a fixed rate for a few years, you might also find that newer loans come with features you didn't have access to before, like offset accounts or the ability to make extra repayments without penalty.
Releasing Equity to Buy Again
One of the reasons first-time buyers refinance is to access equity they've built up in their property. If your property has increased in value and you've paid down some of your loan, that equity can be used as a deposit for an investment property or an upgrade.
Lenders will generally let you borrow up to 80% of your property's current value without paying LMI again. If your property was valued when you refinance and it's gone up, that 80% threshold gives you access to funds you wouldn't have had otherwise. You're not pulling cash out for a holiday, you're using it strategically to build your property portfolio or move into a home that suits your circumstances now. We regularly see this with buyers who started in a unit or townhouse and want to move into something larger without selling first.
How the Refinance Process Works
You'll need to provide updated income documents, a few months of bank statements, and details about your current loan. The new lender will organise a valuation of your property, and once they're happy with your application, they'll send you a formal approval. From there, it's a matter of signing documents and setting a settlement date. Your new lender pays out your old loan, and you start making repayments to them instead.
The whole process usually takes between four and six weeks, depending on how quickly you can get documents together and how busy the lender is. Some lenders are faster than others, and some have stricter requirements around income verification or property types. That's where working with a broker can smooth things out, because we know which lenders are going to be a good fit for your situation before you waste time on an application that won't go anywhere.
If you bought your first property a few years ago and haven't looked at your loan since, it's worth checking what's available now. Rates change, lenders update their products, and your situation probably looks different than it did when you first applied. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
When should first-time buyers consider refinancing?
Refinancing makes sense when you can access a rate at least 0.5% lower than your current loan, or when your fixed rate period is ending and you'd otherwise roll onto a higher variable rate. It's also worth considering if you want to add features like an offset account or release equity for another purchase.
What do lenders assess when you refinance?
Lenders reassess your income, expenses, and the current value of your property. If your property has increased in value or your loan balance has decreased, you may qualify for lower rates or remove lender's mortgage insurance you were paying previously.
How long does the refinance process take?
The refinance process typically takes four to six weeks from application to settlement. The timeline depends on how quickly you provide documents and how busy the lender is at the time.
Can I use equity from my first home to buy an investment property?
Yes, if your property has increased in value and you've paid down your loan, you can refinance to access that equity. Lenders generally allow you to borrow up to 80% of your property's current value without paying lender's mortgage insurance again.
What costs are involved in refinancing?
Refinancing costs include application fees, valuation fees, and sometimes discharge fees from your current lender. These costs need to be weighed against the interest savings to determine if refinancing is worthwhile.
