Refinancing: What You Really Should Know Before Switching Lenders

Refinancing is not automatically cheaper, easier, or suitable for everyone. Switching lenders involves reassessment of your financial position, potential fees, and changes to loan terms or features. Outcomes depend on personal circumstances, lender policies, and market conditions at the time of application. Understanding common refinancing myths can help borrowers make informed decisions rather than relying on assumptions.

Why Refinancing Is Often Misunderstood

Refinancing is frequently promoted as a simple way to save money or “get a better deal”, but the reality is more nuanced. Many assumptions about refinancing come from outdated information, advertising headlines, or conversations that don’t account for individual circumstances. Understanding what refinancing can and cannot do helps borrowers approach the process with realistic expectations and avoid costly mistakes.

Refinancing Always Gets You a Lower Rate

One of the most common misconceptions is that refinancing automatically leads to a lower interest rate. While some borrowers may secure a lower rate, this outcome is not guaranteed. Lenders reassess your income, expenses, debts, credit history and property value at the time of application. Changes in any of these areas, or in lender policies, can affect the rate offered or whether approval is granted at all.

It’s Free to Refinance

Refinancing often involves costs that need to be considered carefully. These can include discharge fees from your current lender, application fees with a new lender, valuation fees and government charges. In some cases, these costs may outweigh any potential benefits. This is why refinancing decisions should be based on a full understanding of both short- and long-term costs.

Switching Lenders Is Quick and Simple

While technology has streamlined parts of the process, refinancing still requires documentation, assessment and approval. This includes income verification, expense analysis and property valuation. Timeframes vary depending on the lender, the complexity of your situation and how quickly information is provided. Refinancing should be treated as a structured process, not an instant switch.

You Can Refinance Anytime Without Penalties

Some loans, particularly fixed-rate loans, may involve break costs if you refinance before the fixed period ends. These costs can be significant and are influenced by market movements and remaining fixed terms. Before considering a refinance, it’s important to understand any contractual obligations tied to your existing loan.

A Lower Rate Is All That Matters

Interest rate is only one part of a home loan. Features such as offset accounts, redraw facilities, repayment flexibility and ongoing fees all affect how suitable a loan is for your circumstances. A loan with a lower rate but fewer features may not always be a better fit. Refinancing decisions should consider the overall structure, not just the headline number.

Refinancing Means Starting From Scratch

While refinancing does involve a new application and assessment, it doesn’t necessarily mean starting your loan journey over. Your repayment history, equity position and financial behaviour still form part of your overall profile. However, extending the loan term during a refinance can increase the total interest paid over time, which is an important consideration.

Refinancing myths often oversimplify a process that deserves careful consideration. By understanding what refinancing really involves. Preparation, realistic expectations and professional guidance are essential to determining whether switching lenders makes sense for your situation. With BrokerCo’s general guidance, you can work out what plan is best for you.