Refinancing for First-Time Homeowners: What You Should Know

You bought your first home and it is a momentous milestone. But that is just the beginning of your homeownership journey.

Your home loan might be over 25 or 30 years but it needs to be reviewed regularly to ensure you are still getting competitive rates and a product that suits your needs as they are from time to time.

Refinancing can present an opportunity to improve your financial position, save money, and achieve your long-term goals. In this guide, we’ll explore when first-time buyers should consider refinancing, how to leverage competitive rates and better loan terms, and government schemes and grants that could help you along the way.

 

When Should First-Time Buyers Consider Refinancing?

If or when to refinance your home loan depends on your personal circumstances and financial goals. Here are some key indicators that it might be the right time to refinance:

1. Interest Rates Have Moved

The Reserve Bank of Australia’s monetary policies can lead to fluctuations in interest rates. If rates have changed since you took out your loan, refinancing could reduce your monthly repayments and save you thousands over the life of your loan.

2. You’ve Built Equity in Your Home

Equity is the difference between your home’s market value and the outstanding balance on your mortgage. As you pay down your loan or your property value increases, your equity grows. As your equity grows you may qualify for better (lower) rates.

Refinancing can also help you unlock this equity for renovations, debt consolidation, or even purchasing an investment property.

3. Your Fixed Rate is About to Expire

If you initially opted for a fixed-rate loan, it’s important to review your options before the fixed period ends. Lenders often revert fixed loans to higher variable rates. Refinancing gives you a chance to secure a better deal.

4. Your Financial Situation Has Improved

First-time buyers often secure loans with higher interest rates due to limited credit history or smaller deposits. If your income has increased, your credit score has improved, or you’ve paid off other debts, you may now qualify for a lower interest rate or more favourable loan terms.

5. What You Need From A Loan Changes

Refinancing can provide access to loan features that best fit your needs and circumstances as they change over time.  This can save you money and make managing your loan easier.

6. Your Current Loan No Longer Meets Your Needs

Life circumstances can change. Whether you’re starting a family, relocating for work, or planning renovations, refinancing allows you to restructure your loan to better align with your goals.

 

How to Take Advantage of Competitive Rates and Better Loan Terms

Refinancing can lead to significant savings, but to make the most of it, you need a strategic approach. Here’s how to secure the best deal:

1. Shop Around

Don’t settle for the first offer you come across. Use comparison websites, consult mortgage brokers, and research various lenders to find the most competitive rates and features.

2. Understand the Costs of Refinancing

Refinancing isn’t free. Common costs include:

• Discharge Fees: Charged by your current lender to close your loan.
• Application Fees: Required by your new lender to process your application.
• Lenders Mortgage Insurance (LMI): May apply if your equity is below 20%.

Calculate these costs and compare them against the potential savings to ensure refinancing is financially worthwhile.

3. Negotiate with Your Current Lender

Before refinancing, talk to your current lender. They may be willing to match or beat competitors’ rates to retain your business, saving you the hassle of switching.

4. Leverage Equity for Better Terms

A lower loan-to-value ratio (LVR) can help you secure lower rates. Lenders offer better rates for lending that does not involve Lenders Mortgage Insurance (lending under 80%) bur rates can drop further as the LVR drops below 70% or 60%.

5. Consider Fixed, Variable, or Split Loans

Each loan type has pros and cons:

• Fixed Loans: Provide certainty with consistent repayments, ideal during periods of rising interest rates.
• Variable Loans: Offer flexibility and may save you money when rates drop.
• Split Loans: Combine the benefits of fixed and variable rates, providing a balanced approach.

Discuss these options with a mortgage broker to determine the best fit for your needs.

6. Improve Your Creditworthiness

Lenders assess your credit score and financial history when reviewing refinancing applications. And a poor credit score can impact which the lenders who will lend to you.  That can in turn impact the rates on offer.

To keep your credit record clear and clean:

• Pay bills and loan repayments on time.
• Reduce credit card balances.
• Avoid applying for multiple loans or credit cards in a short period.
• Regularly review your credit report for errors.

 

Government Schemes and Grants to Keep in Mind

Australia offers various schemes and grants designed to assist first-time homeowners. While many are aimed at homebuyers, some can indirectly benefit those refinancing:

1. First Home Loan Deposit Scheme (FHLDS)

This program allows eligible first-home buyers to purchase a property with as little as a 5% deposit, with the government guaranteeing the remaining 15%. If you initially purchased your home under this scheme, refinancing with sufficient equity could remove the guarantee and help you secure better loan terms.

2. Energy-Efficiency Incentives

Government programs encourage homeowners to adopt sustainable practices. Refinancing to fund solar panels, energy-efficient appliances, or insulation upgrades can qualify you for green loans with lower rates while reducing your long-term energy costs.

 

Common Refinancing Mistakes to Avoid

Refinancing can be complex, and first-time homeowners may face pitfalls without proper guidance. Here’s what to watch out for:

1. Focusing Only on Interest Rates

While lower interest rates are attractive, don’t overlook fees, loan features, and customer service. A loan with slightly higher rates but better features may save you more in the long run.

2. Not Checking Exit Fees

Review your current loan for any discharge or break fees, especially if you’re exiting a fixed-rate term early. These costs can impact the overall benefits of refinancing.

3. Failing to Prepare Financially

Lenders will scrutinise your financial situation. Ensure your finances are in good shape, with minimal debts and stable income, to improve your approval chances.

4. Overlooking Loan Terms

Read the fine print. Understand the terms and conditions of your new loan, including any restrictions on additional repayments, redraw facilities, or offset accounts.

5. Refinancing Too Frequently

Constantly switching loans can incur fees and negatively impact your credit score. Ensure refinancing aligns with your long-term goals and is not a short-term fix.

 

Final Thoughts

Refinancing offers first-time homeowners a valuable opportunity to improve their financial position, save money, and adapt their loan to changing circumstances. By understanding when to refinance, leveraging competitive rates, and considering government schemes, you can make informed decisions that align with your goals.

As Australia’s property market evolves in 2025, staying proactive and informed is key. If you’re considering refinancing, Hatch Financial Services is here to help. Our expert brokers can guide you through the process, compare the best loan options, and ensure you achieve the best outcome for your situation. Contact us today to explore your refinancing opportunities.