When Should You Refinance Your Home Loan? A Broker's Decision Framework

Refinancing sounds simple: find a lower rate, switch lenders, save money. In practice, it's more nuanced. Discharge fees, new establishment fees, break costs on fixed loans, and the time cost of the application process all need to be weighed against the potential savings.

The break-even calculation is straightforward. Add up all the costs of refinancing (discharge fee, application fee, valuation, legal costs) and divide by the monthly saving from the lower rate. If the break-even period is under 12 months, it's almost always worth switching. If it's over 36 months, think carefully.

The biggest trap is refinancing from a variable rate to another variable rate when the saving is marginal. If you're saving 0.15% on a $500,000 loan, that's $750 per year — but refinancing costs might be $1,500 to $3,000. You won't recoup those costs for two to four years, and rates may change again in that time.

Conversely, some clients are sitting on rates that are 1% or more above current market rates — particularly those who took out loans during 2020-2021 when rates were at historic lows and have since been hit with aggressive rate increases. For these borrowers, the savings can be $5,000+ per year, making refinancing a no-brainer.

Fixed rate expiry is the most natural refinancing trigger. When a client's fixed rate is about to roll to a variable rate (often the lender's SVR, which is typically higher than competitive rates), it's the ideal time to review the market. There are no break costs, and the client is already expecting a payment change.

As a broker, your value in the refinancing conversation isn't just finding a lower rate — it's modelling the full picture. BrokerIQ's refinance calculator shows clients the lifetime savings, break-even point, and total cost comparison between staying and switching, making it easy to have an evidence-based conversation.