Common Mistakes When Refinancing for a Lower Rate

Waiting Until Your Fixed Rate Ends to Start Looking

You should start reviewing options at least three months before your fixed period expires.

Many Revesby homeowners lock in during a low rate cycle and then assume they'll deal with it when the fixed term finishes. That approach leaves you scrambling when your rate reverts to variable, which can sit 1.5% to 2% higher than what new borrowers are getting. If you're holding a loan that fixed at 2.3% and it's reverting to 6.5%, that gap adds hundreds of dollars per month on a typical Revesby mortgage. Starting early gives you time to compare lenders, submit applications, and settle before reversion hits. If you're coming off a fixed rate, the clock matters more than you think.

Consider someone with $550,000 remaining on their home loan. If they wait until reversion day to lodge an application, they're paying the higher rate for at least another six to eight weeks while the new lender processes valuations and paperwork. That delay alone can cost over $1,000 in extra interest. Moving early means you can time settlement to align with your fixed term ending, so you switch straight from one rate to another without a costly gap in between.

Refinancing Without Running the Numbers on Total Costs

You'll only save money if the rate drop covers your upfront costs within a reasonable period.

A lower rate sounds appealing until you factor in application fees, valuation charges, and discharge fees from your current lender. In Revesby, where property values have held steady around the mid-$800,000 mark for established homes, a typical refinance might involve $1,200 to $1,800 in fees. If you're switching to save 0.3% per year on a $400,000 loan, that's $1,200 annually. You'll break even after 12 to 18 months, which makes sense if you're staying put. But if you're planning to sell or move within the year, you're wearing the cost without getting the benefit.

Some lenders will roll costs into the loan amount, which sounds convenient but means you're paying interest on those fees for the life of the loan. Others waive application fees during promotional periods. The calculation changes depending on your situation, so it's worth mapping out the payback period before you commit. A loan health check can show you whether the numbers actually stack up for your circumstances.

Ignoring Features You're Giving Up in the Switch

A lower rate doesn't help if you lose offset accounts or redraw that you rely on.

Some Revesby households refinance to chase a headline rate and then realise their new loan doesn't include an offset account or has restrictive redraw limits. If you're parking $30,000 in an offset and your new loan doesn't offer one, you're paying interest on that $30,000 even if your headline rate dropped. On a variable rate around current levels, that could mean $150 per month in extra interest, which quickly wipes out any saving from a 0.2% rate cut.

In our experience, borrowers who rely on redraw for irregular lump sum payments can also get caught out. Some lenders cap redraw amounts or charge fees to access your own money. Others don't allow redraw at all on certain loan types. Before you move, compare the features side by side and make sure the new loan doesn't strip away flexibility you actually use.

Applying with Only One Lender Because They Advertised the Lowest Rate

The advertised rate usually requires a deposit or equity position you might not have.

Headline rates in ads are typically based on a loan-to-value ratio of 70% or lower, which means you need at least 30% equity in your property. If your Revesby home is valued around the current median and you owe more than 70% of that, you won't qualify for the advertised rate. You'll be offered a higher tier, sometimes 0.4% or more above what you saw online. That gap can turn an attractive deal into one that's barely worth the effort.

This is where a broker can help. We regularly see scenarios where a borrower applies direct to a lender based on an ad, gets declined or offered a worse rate, and then comes to us for options. A broker compares multiple lenders based on your actual equity position and loan amount, so you're not guessing which one will accept you at the rate you need. It also saves you from multiple credit enquiries, which can affect your credit file if you're applying around trying to find someone who'll match the advertised figure.

Refinancing to a Rate That's Only Slightly Lower

Switching for less than 0.3% in savings rarely justifies the time and cost involved.

If your current rate is 6.2% and a new lender offers 6.0%, the annual saving on a $500,000 loan is around $1,000. After paying discharge and application fees, you're looking at 18 months or more before you're ahead. That timeframe only works if nothing else changes. If rates drop further and you want to refinance again, you're back to square one with another round of costs.

The threshold that usually makes sense is at least 0.5% in rate reduction, or a switch that also gives you access to equity or consolidates other debts. If you're only chasing the rate, make sure the gap is wide enough to deliver a tangible outcome. Otherwise, you're doing paperwork for minimal gain.

Forgetting to Check Whether Your Property Will Value High Enough

If your property values lower than expected, your loan-to-value ratio rises and your rate offer changes.

Refinancing relies on the new lender's valuation of your property. In Revesby, where the market includes a mix of older fibro homes and newer builds near the town centre, valuations can vary depending on the property's condition and location within the suburb. If you assume your home is worth $850,000 based on recent sales but the lender's valuer comes back at $800,000, your equity position drops and you might no longer qualify for the rate you were quoted.

This is especially relevant if you bought at the peak or if you've done renovations that aren't yet reflected in comparable sales data. Some lenders are more conservative than others, and some rely on desktop valuations that don't account for improvements. If you're borderline on loan-to-value ratio, it's worth getting a sense of how your property might value before you lodge an application. That way you're not surprised by a lower rate offer or a request for lender's mortgage insurance.

Not Reviewing Your Loan Structure When You Refinance

Refinancing is the right time to consider whether your current structure still suits your goals.

Many Revesby households took out a standard variable home loan years ago and haven't revisited whether that structure still fits. If you're now earning more and want to pay off your mortgage faster, switching to a loan with an offset and unlimited extra repayments gives you flexibility without locking you into higher fixed payments. If you're planning to buy an investment property in the next few years, setting up a split loan now means you can access equity later without disrupting your tax position.

Refinancing gives you a clean slate to adjust loan terms, split portions between fixed and variable, or separate your owner-occupied and investment debt if you're moving into a new property and keeping your current one as a rental. It's also a chance to consolidate any personal loans or car debt into your mortgage if the numbers make sense, which can improve cashflow and reduce your overall interest burden. Don't just replicate your old loan structure because it's familiar.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare what's available in Revesby, and show you whether refinancing to a lower rate will actually put you ahead.

Frequently Asked Questions