Smarter Refinancing: Avoid Costly Mistakes and Make Your Money Work Harder

Refinancing your home loan can be a savvy way to save thousands. However, the key is avoiding some common missteps and making strategic decisions that align with your goals.

1. Don’t Just Chase the Lowest Rate

It’s tempting to pick a loan purely based on the tempting interest rate, but that’s a common trap. The advertised rate rarely tells the full story. As brokers, we see the same story repeated regularly. The Alice Springs Police Credit Union (no, that’s not real) offers the lowest, eye-catching rate in the market. People move their mortgage across, only to find out customer service is non-existent, the tech experience is confusing and seriously lacking and a lot of the useful features offered by better brands aren't able to be accessed. Focusing purely on interest might cost you more in the long run, even if that rate looks appealing. 

2. Be Wary of Fixed-Rate Pitfalls

Fixed-rate loans offer predictability, but breaking one can come with hefty penalties. If you refinance a fixed-rate portion early, the "break fee" could outweigh expected interest savings. In times when variable rates are falling, sticking with a fixed loan without flexibility can cost you. 

3. Avoid Extending Your Loan Term Unnecessarily

Refinancing for a longer term may reduce your monthly repayments, but it increases the total interest you pay over time. For example, rolling the loan into another 30‑year term essentially sacrifices years of equity building for short-term comfort. If you're aiming to pay off your mortgage sooner, consider refinancing into a shorter term instead. However, the extended term can often be very handy for people who are using it as a means to expand their property portfolio. The key is to ensure you are in control of your finances and have a solid strategy in place. 

4. Stay Open to Other Lenders

Loyalty to your current bank might feel comfortable, but it can blindside you to better offers. Shopping around and comparing multiple lenders can often save thousands. Don’t just settle for what you know; get quotes from others and leverage that to negotiation. A good broker does this for you, every time.  

5. Timing Matters - Don't Wait for Perfect Conditions

Many try to "play the market," timing their refinance for when rates dip further. The reality? Markets are unpredictable. If a deal makes financial sense now, don’t delay - it may evaporate before you know it. Our founder, Jim, worked in institutional global markets for 2 decades. He knows that the professionals who are paid big money to predict interest rates, very often get it wrong. Play the long game. 

6. Only Refinance When You're Financially Strong

Avoid refinancing if you're experiencing income instability or carrying high debts. Lenders look at your financial health when evaluating your loan. If it’s not a smooth ride, refinancing now may leave you with worse terms or higher stress in the long run. Most lenders use a 3% interest rate buffer when assessing your ability to repay the loan. So even if you’re comfortably paying your current loan, you may still fail servicing for the refinance.

7. Account for All Fees - New and Old

Switching loans may come with a slew of both current and past costs: discharge or break fees from your existing loan, plus new application, valuation, or LMI fees at the new lender. These extra costs can negate your expected savings. Always factor them in to check whether refinancing is truly worthwhile. 

Quick Recap: 7 Mistakes to Avoid When Refinancing

• Fixating on low interest rates without checking the total cost.

• Ignoring break fees from fixed-rate loans.

• Lengthening loan terms, boosting long-term interest.

• Staying with one lender without comparing offers.

• Waiting on rate changes instead of acting on current benefits.

• Refinancing under financial stress, hurting your terms.

• Overlooking new exit and entry costs, diluting savings.

Final Thought

Refinancing can offer real benefits: lower repayments, better features, more flexibility - but only when done thoughtfully. Keep the whole picture in focus: rate vs cost, short‑term relief vs long-term gain, and lender features vs personal financial readiness.

Always work with a broker who will be upfront about all costs you will incur and only recommend refinancing if you will be better off. 

Curious about recalculating your loan benefits or want help weighing options? We’d be happy to help refine your approach!