Refinance a home loan when the saving over the time the client expects to keep it beats the switching costs, and the new loan meets their needs. Calculate that result from the current contract before recommending a switch.
The RBA cash-rate target provides context, but the lender sets the client’s mortgage rate. A headline rate move does not show whether this loan saves money after costs. Use the refinancing explanation for clients when explaining what changes in a switch.
Mortgage Conditions That Affect Refinance Timing
The live lender rate sheet and the client’s existing contract determine the comparison. Use the available product rate for the client’s loan size, purpose and loan-to-value ratio (LVR). A forecast does not establish the saving.
Allow for a serviceability buffer of about three percentage points on the new loan. APRA’s APS 220 Credit Risk Management sets a minimum three-percentage-point buffer for banks unless APRA determines otherwise. Apply the new lender’s assessment policy, including its treatment of income and expenses.
A fixed-to-variable switch can trigger break costs even when the variable rate looks lower. Request the lender’s break-cost quote before deciding whether an early exit pays.
A beneficial refinance leaves the client ahead after all costs compared with staying, and the new loan is not unsuitable. More equity can improve the available terms, but it does not cancel a break cost.
The Role of a Mortgage Broker in 2026
A mortgage broker assesses the client’s purpose and compares suitable options on the panel they are appointed to write. Record the panel’s limits and the reason for the recommendation. A lower advertised rate alone does not establish the client’s best interests.
Record whether the client wants a rate reduction, debt clean-up or cash-out. Treat these as different files because the borrowing purpose and repayment consequences differ. For debt consolidation, compare the total interest as well as the monthly repayment. Refer tax questions about redraw or cash-out to the client’s tax adviser.
Use current lender rates and product terms instead of rate forecasts. Keep the rate sheet and assumptions used in the file. ASIC’s RG 234 Advertising financial products and services (including credit), reissued in 2026, guides advertising claims about savings.
ASIC’s RG 273 Mortgage brokers: Best interests duty explains the broker’s obligations. If the existing loan is recent, assess any commission clawback separately. The broker’s commission position must not determine the client’s recommendation.
Criteria for Considering Refinance
A client can seek a refinance soon after the purchase settles, subject to the new lender’s eligibility and repayment-history requirements. Approval timing and financial benefit are separate questions. An early switch only pays when savings recover the discharge, setup and any fixed-rate break costs within the client’s expected holding period.
Refinance when the saving over the next two to three years exceeds switching costs and the new loan meets the client’s needs. Assess any broker clawback separately: it is your business cost and must not delay a refinance that serves the client’s best interests. The “2% rule”, which says to refinance once rates fall two percentage points below the current rate, ignores the client’s actual costs and holding period.
Check the credit file, arrears and debt-to-income position against the new lender’s assessment sheet. Verify income and expenses before presenting a lower rate as an available option. A shorter term can increase repayments enough to fail serviceability.
Break-even is the time needed for ongoing savings to recover the total switching cost. Include discharge, application and valuation fees, any fixed-rate break cost and any new lenders mortgage insurance (LMI). LMI protects the lender. Include any interest charged on costs added to the new loan.
For a simple estimate, divide total switching costs by the monthly saving after ongoing fees. Compare the same balance and remaining term. Extending the term can reduce repayments while increasing total interest. The refinance calculator runs this comparison on the offers you enter.
In a hypothetical comparison, switching costs total $3,600 and the new loan saves $200 a month after ongoing fees. Break-even is 18 months. A client planning to sell after 12 months would save $2,400 before switching costs, leaving them $1,200 behind.
The estimate assumes rates and savings stay constant. Model a fixed-rate expiry or introductory-rate change when one falls within the comparison period. Moneysmart’s switching guide explains the costs and the effect of changing the loan term.
Steps in the Refinance Process
Build the recommendation from confirmed exit costs and the new lender’s current offer. Follow this order so an attractive rate does not become advice before the costs are known.
- Collect the current contract and request a payout figure. Record the balance, remaining term, repayment type and features the client uses.
- Request the break-cost quote for a fixed loan. Note its validity and refresh it if settlement timing changes.
- Compare the new loan on the live sheet. Use the same remaining term and account for ongoing fees, offset needs and the rate after any introductory period.
- Recommend or stop. Record the after-cost result, serviceability assessment and why the outcome meets the client’s needs and best interests.
- Keep the old loan in place until the new loan has settled. Conditional approval is not settlement. Follow the lenders’ discharge and settlement instructions, then confirm the old balance is paid out.
Before closing the file, compare the final payout and new loan documents with the recommendation. If costs or terms change enough to remove the benefit, reassess the recommendation before settlement.
Managing Refinancing Outcomes
After settlement, record the new revert date and any fixed-rate end date. Set a review before those events so the client has time to compare options without treating another refinance as automatic. No set interval applies to refinancing again: another switch pays only when the review shows it passes break-even.
Use a post-settlement client review program to keep that follow-up consistent. Track My Trail’s Refinance Finder builds a review queue from settlement dates and returns reviewed loans to the queue after 90 days. The review identifies the next assessment, rather than deciding that a refinance is suitable.
Keep credit assistance within your authorisation. Personal financial product advice requires the appropriate Australian financial services licence (AFSL) authorisation or referral. A client review can expose investment or insurance questions beyond the credit recommendation.
A client refinancing away also affects the brokerage’s book. Assess runoff and drop-off rates separately from the client’s borrowing decision.
Other Refinance Checks for 2026
Technology can reduce document handling, but the broker still assesses the recommendation. Use the aggregator CRM and lender upload process to collect information, then verify pre-filled figures against the client’s documents.
If the client wants an environmental, social and governance (ESG) feature, compare the lender’s written green-loan or energy-upgrade eligibility and costs. A feature only helps the timing decision if the client qualifies and it improves the result for their needs.
HomeBuilder is closed to applications. The Australian Government 5% Deposit Scheme is a first-home purchase path, not a refinance rebate. Keep government incentives out of the saving calculation unless the client and transaction meet the program’s actual eligibility rules.
Request Costs Before Quoting a Saving
Get the payout and break-cost figures first. Recommend a refinance only when the after-cost comparison supports it, the recommendation meets the best interests duty and the new loan is not unsuitable. Keep the figures and reasons on the client’s file.
