Your current rate might be higher than what you'd get if you applied today.
Most lenders offer lower rates to new customers than they give existing borrowers. If you locked in a fixed rate a few years back and rolled onto the lender's standard variable rate when it expired, you're probably paying more than you need to. That difference adds up quickly over the life of a loan.
Check what rate you're actually on
Log into your home loan account and find your current interest rate. It'll be listed on your most recent statement or in the online portal. Write it down. Then compare it to what the same lender is advertising for new customers with a similar loan type and deposit size. If there's more than a 0.3% gap, you're likely paying too much.
Consider a high school teacher who finished a three-year fixed term at 2.1% and moved onto a variable rate of 6.8%. The same lender was offering new customers a rate of 6.2% for the same product. That 0.6% difference on a remaining balance meant she was overpaying by several thousand dollars a year. When she asked the lender to match the advertised rate, they dropped it to 6.4%. She could have switched to another lender offering 6.0%, but weighed that against the time and paperwork involved.
When a small difference actually matters
A rate difference of 0.1% might not sound like much. On a loan balance around the median for many Australian suburbs, that gap can mean a few hundred dollars a year. But anything above 0.3% starts to justify the effort of switching. The higher your remaining balance and the longer you plan to stay in the property, the more a rate reduction adds up.
Some lenders rely on inertia. They know most borrowers won't check their rate regularly or compare what else is available. If your rate hasn't changed in the past year and you haven't heard from your lender, you're probably not getting the best deal they can offer.
Free Property Report
Get a free Property Report from Teacher Loans, the team who understands the needs of Teachers & Education Professionals
How to compare your rate properly
Don't just look at the advertised interest rate. Check the comparison rate as well, which includes most ongoing fees. A loan with a slightly higher interest rate but lower fees can work out cheaper overall. Look for lenders offering rates at least 0.4% to 0.5% below your current one after accounting for any application or ongoing costs.
If you're on a variable rate, compare it to other variable products. If you're coming off a fixed term, compare both fixed and variable options. Some lenders offer split loans that let you fix part of the balance and keep the rest variable, which can smooth out the impact of rate movements without locking you in entirely.
What it costs to switch
Refinancing isn't usually expensive, but it's not without cost. Expect to pay a discharge fee to your current lender, usually between $300 and $400. The new lender may charge an application fee, though many waive this. You'll also need to cover valuation costs and possibly legal fees, which together can add another $500 to $1,000.
If you're still in a fixed rate period, break costs can run into the thousands depending on how much time is left and how much rates have moved since you fixed. Before committing to a switch, get a discharge statement from your current lender showing any exit fees or break costs. Then compare that total to what you'll save over the next few years at the new rate. If the savings outweigh the costs within 12 to 18 months, the switch usually makes sense.
For teachers with access to LMI waivers or other profession-specific lending options, refinancing can open up more than just a lower rate. Some lenders offer better terms for high school staff, which might include fee waivers or offset accounts that weren't available when you first borrowed.
What to do if you're not sure
Pull your most recent loan statement and note your current balance, interest rate, and remaining loan term. Then look at what other lenders are advertising for someone in your position. If the gap is 0.5% or more, it's worth getting a formal comparison. If it's less than 0.3%, your time might be spent elsewhere unless your loan balance is high or you're planning to hold the property for many years.
A home loan refinance doesn't have to be complicated, but it does require a current valuation, income verification, and a fresh credit check. If your financial situation has changed since you first borrowed, that can work for or against you. A higher salary or lower debt might get you a rate reduction. A recent credit default or reduced hours could limit your options.
Call one of our team or book an appointment at a time that works for you. We'll review your current loan, compare it to what's available, and walk through whether switching makes sense for your situation.
Frequently Asked Questions
How do I know if my interest rate is too high?
Compare your current rate to what the same lender advertises for new customers with a similar loan and deposit. If there's more than a 0.3% gap, you're likely paying more than you need to.
What does it cost to refinance to a lower rate?
Expect to pay a discharge fee of $300 to $400, plus valuation and legal costs of around $500 to $1,000. If you're in a fixed rate period, break costs may also apply and can be significant depending on rate movements.
When is a rate difference worth switching for?
A rate gap of 0.4% to 0.5% or more usually justifies refinancing, especially on higher loan balances. If the total savings outweigh switching costs within 12 to 18 months, it generally makes sense to move.
Can I ask my current lender to lower my rate?
Yes, many lenders will reduce your rate if you ask, particularly if you mention switching. They may not match the lowest advertised rate, but even a small reduction can save you thousands over time.
