When to Refinance to Lower Your Monthly Repayments

A refinance can lower your monthly repayments, but only if the savings outweigh what it costs to move.

For Kingston homeowners, the question is not whether a refinance is possible. It is whether the numbers work once you add up fees, loan term and what you give up. Let's walk through when it makes sense.

When Does It Make Sense to Refinance a Home Loan?

It makes sense when your new repayments fall by more than the total cost of switching, and when the new loan still suits how you use your money. The usual triggers are a fixed rate period ending, a rate that has drifted above what other lenders are offering, or a change in your income or household.

If you have been paying on time for a while and you are not borrowing extra, lenders tend to treat a switch to a lower rate as a lower-risk request. ASIC guidance says a refinance is likely to be suitable where repayments will fall and your circumstances have not worsened. Lenders still check your income and expenses, so having your recent statements ready speeds things along.

A good starting point is a loan health check. It compares your current rate, fees and features against what is available to you, depending on your deposit size, equity and lender.

Coming Off a Fixed Rate: What Happens to Your Repayments?

When a fixed rate expires, your loan usually moves to the lender's variable rate, which can change your repayments. That is the ideal moment to look around, because leaving at expiry means you avoid a break fee.

A break fee only applies if you end a fixed loan before the term finishes. It is not charged on variable loans. If you are weighing up leaving early, ask your lender for a break cost figure first. Our page on fixed rate expiry explains your options in the months before the date arrives, including whether to stay fixed, switch to variable or split the loan.

Refinance Costs: What You Might Pay to Switch

The main costs are a discharge fee on the old loan, an application fee on the new one, and possibly a break fee or lenders mortgage insurance. Exit fees are generally banned on residential loans signed on or after 1 July 2011, but discharge and break fees are not covered by that ban.

If you have less than 20 per cent equity, a new lender may charge lenders mortgage insurance, which can wipe out the saving. Fees vary by lender, so ask for the full list before you commit. A broker also has to check that the switch is in your interests, and that includes recommending you stay put if the costs would outweigh the savings.

Lower Repayments vs Lower Cost: A Worked Example

Stretching your loan term lowers your monthly repayment, but you pay interest for longer. Here is how that looks in an illustrative example.

Consider a Kingston homeowner with $500,000 left on their loan and 25 years to go. At an illustrative rate of 6.75% p.a., their principal and interest repayment is about $3,455 a month. Their budget is tight after a change at work, so they refinance and reset the term to 30 years, keeping the same illustrative 6.75% p.a. rate. The repayment drops to about $3,243 a month, roughly $212 less.

The trade-off is real. Because the loan runs five years longer, they pay interest for longer, and ASIC expects borrowers to be told that when repayments fall only because the term is longer. So they take a middle path. They keep the longer term as a safety net but keep paying toward the old amount when the budget allows. The minimum repayment is the lower required amount under the loan contract, but it is worth checking your loan terms and how extra repayments and redraw work, as access can be restricted. Check your own figures with a repayment calculator before deciding.

If your rate is genuinely lower, you may not need to extend the term at all. A lower rate on the same term cuts repayments without adding years. A longer term is the second lever, and it is the costlier one.

Will a New Lender Approve Your Refinance?

A new lender will assess you as if you were a new borrower, so your income, expenses and debts all count again. Banks must test your ability to repay at a rate 3 percentage points above the loan rate, as confirmed by APRA in May 2026.

That can catch out borrowers whose circumstances have changed since they first borrowed. APRA has noted that lenders assess these cases individually and can consider things like your repayment history, so a solid record helps. Your borrowing capacity may be different from when you first took out the loan, and our borrowing capacity page shows what affects it.

Using an Offset or Redraw When You Refinance

An offset account or redraw facility can keep your repayments flexible, but each has a cost or limit. An offset account reduces the interest charged by the balance sitting in it. Redraw lets you pull back extra repayments you have made.

Some lenders charge a higher rate or a package fee for an offset account, so check that the saving outweighs the cost. Redraw can also be restricted by the lender, so ask how access works. If you keep a cash buffer in an offset, you reduce interest without locking the money away.

Refinancing an Investment Property Loan

If the loan is for an investment property, the interest you can claim depends on what the borrowed money was used for. If you refinance and borrow extra for personal use, the ATO says the interest must be apportioned. That means only the investment part of the interest is deductible.

Borrowing expenses linked to the investment part of a loan may be deductible over time, but the rules are specific, so speak to your accountant before you act. Our refinancing team can explain how the loan structure works, and your accountant can confirm the tax side.

Why Kingston Homeowners Review Their Loans

Kingston sits in Canberra's South Canberra district, and loan rates and terms vary depending on when a loan was taken out. A review is useful whether you live near the Kingston Foreshore on Lake Burley Griffin or elsewhere in the suburb. Our local mortgage broker in Kingston page has more on how we help.

If your repayments feel heavy, ask us to check the numbers. Call one of our team or book an appointment at a time that works for you, and we will work out whether switching saves you money or whether staying put is the smarter move.

Frequently Asked Questions