Refinancing & What Not to Do with First-Timer Rates

If you bought your first property within the last few years, your current rate might already be higher than what lenders are offering to new borrowers today.

Many dentists who purchased during the fixed rate boom are now coming off those initial terms and discovering their revert rate sits well above what's available elsewhere. The assumption that loyalty keeps costs down rarely holds. Lenders price for acquisition, not retention. That gap between what you're paying and what you could be paying is often wider than expected, particularly if your loan has rolled onto a standard variable product without offset or redraw features you actually use.

Why Your First-Time Buyer Rate No Longer Reflects the Market

Your initial rate was likely structured to win your business, not to remain relevant three or four years later. Lenders adjust their pricing constantly, and the product you were offered as a first-time buyer may no longer exist in that form. If your fixed rate period is ending, the rate you revert to is typically higher than what the same lender is advertising to new customers. This isn't unusual, but it does mean your loan might be costing you more than it should.

Consider a general dentist who purchased an apartment with a 10% deposit and locked in a two-year fixed rate. When that term expired, the loan reverted to a standard variable rate of around 6.2%. The same lender was offering new borrowers a rate closer to 5.8% on a comparable product. Over the life of the loan, that 0.4% difference compounds, particularly on a loan amount in the mid-six figures. The dentist refinanced to a variable product with offset, reducing the rate and gaining access to features that aligned with how they managed their cash flow between locum work and permanent employment.

What Not to Do: Assume Your Current Lender Will Match the Market

Asking your current lender to match a competitor's rate is worth trying, but it rarely delivers the same outcome as a formal refinance. Retention teams have limited pricing discretion, and the rate adjustment they offer often sits somewhere between your current rate and the market, not at the lower end. They also won't typically offer product features or loan structures that weren't part of your original agreement.

If you're looking to access equity, switch from principal-and-interest to interest-only, or add an offset account, a rate match won't address those needs. A home loan refinance allows you to restructure the loan entirely, not just adjust the rate. That distinction matters when your financial position has changed since you first borrowed, whether through income growth, additional savings, or a shift in how you're using the property.

When to Refinance: Fixed Rate Expiry and Equity Position

The clearest trigger for refinancing is fixed rate expiry. If your fixed term is ending within the next three months, start the refinance process now. Lenders typically take four to six weeks to settle a refinance, and if you wait until after your fixed term ends, you'll be paying the revert rate during that period.

Your equity position also determines what's available. If your property has increased in value since purchase, your loan-to-value ratio has improved, which may open access to lower rates or remove the need for lenders mortgage insurance on any top-up. A formal property valuation isn't always required during a refinance, but if you're accessing equity or your LVR is close to a pricing threshold, expect the lender to order one. The valuation might come in lower than recent sales in your area, particularly if the market has softened or if your property type is less favoured by valuers.

Accessing Equity Without Overcapitalising Your Loan

If you're refinancing to access equity, the amount you can release depends on your current LVR and the lender's maximum lending ratio. Most lenders will allow you to borrow up to 80% of the property's value without paying lenders mortgage insurance, though some will go higher with additional premium costs.

Releasing equity to fund an investment property purchase or consolidate other debts can improve your overall cost of borrowing, but only if the amount you're accessing is genuinely productive. Consolidating a car loan or credit card debt into your mortgage reduces the interest rate on that debt, but it also extends the repayment term to match your home loan. A $30,000 car loan paid off over 25 years costs more in total interest than the same debt paid off over five years, even at a lower rate. The refinance application should include a clear purpose for any equity release, and your broker should model the total cost, not just the rate.

What Not to Do: Refinance Based on Rate Alone

A lower interest rate doesn't always mean lower overall costs. Application fees, valuation fees, discharge fees from your current lender, and settlement costs all factor into whether the refinance delivers value. If the rate difference is small and you're planning to sell or refinance again within two years, the upfront costs might outweigh the interest savings.

The loan structure matters as much as the rate. A product with a low advertised rate but no offset, limited redraw, or high break costs on any fixed portion might cost you more in flexibility than it saves in interest. Dentists with variable income from locum work or practice ownership benefit from offset accounts that reduce interest on the full loan balance while keeping funds accessible. A redraw facility offers similar functionality but with less flexibility around withdrawals, particularly if the lender imposes minimum redraw amounts or processing delays.

How the Refinance Process Works for Dentists

The refinance application follows a similar process to your original home loan, but with a few key differences. You'll need to provide updated income documentation, particularly if you've moved from employed to self-employed or taken on additional locum work. Lenders assess your current serviceability, not what you could afford when you first borrowed. If your income has increased, that works in your favour. If you've taken on additional debt or reduced your hours, expect more scrutiny.

Most lenders will accept payslips, tax returns, and recent bank statements. If you're now operating through a company or trust structure, you'll need financials for those entities as well. The lender will also review your current loan statements to confirm the outstanding balance and ensure there are no arrears or missed payments. A loan health check before you apply can identify any issues that might slow down the process, particularly if your credit file has changed since your first purchase.

Offset, Redraw, and Cash Flow Management

If your current loan doesn't include an offset account, adding one during a refinance can reduce the interest you pay without requiring you to lock funds into the mortgage. The offset balance reduces the amount of interest calculated daily, which means any cash sitting in the account is effectively earning a return equal to your loan rate. For a dentist managing irregular income or building a deposit for an investment property, that functionality is often worth more than a slightly lower rate on a product without offset.

Redraw works differently. Any extra repayments you make above the minimum can usually be withdrawn, but the lender controls the process. Some lenders limit how often you can redraw or impose minimums on each withdrawal. If you're using surplus cash flow to pay down the loan but want the option to access those funds later, clarify the redraw terms before you commit. An offset gives you that access without needing lender approval each time.

What Not to Do: Ignore the Discharge and Settlement Timeline

Your current lender will charge a discharge fee to release the mortgage, typically between $300 and $500. If you're still within a fixed rate period, break costs apply, and those can be significant if rates have fallen since you locked in. The calculation is based on the difference between your fixed rate and the current wholesale rate for the remaining term, multiplied by your loan balance. If break costs are substantial, it might be worth waiting until the fixed term ends unless the rate difference is large enough to justify the upfront cost.

Settlement timing matters. If your refinance settles late, you might incur additional interest charges from your current lender. If it settles early and you're breaking a fixed term, you'll pay break costs from the settlement date, not the date you signed the paperwork. Your broker should coordinate the discharge and settlement to align as closely as possible, minimising any overlap or gap in funding.

Refinancing when your circumstances, loan structure, or market pricing have shifted can reduce your cost of borrowing and improve how your loan supports your broader financial position. The process requires current documentation, a clear understanding of the costs involved, and a product that matches how you manage cash flow and debt. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions