If you have not looked at your home loan for a couple of years, there is a good chance you are paying more than you need to. Lenders often offer their sharpest rates to new customers, while existing borrowers drift onto higher rates. Refinancing can fix that, but it is not always the right move.

See what a lower rate could save you with our refinance calculator.

Six signs it is time to refinance

1. Your rate is higher than what new customers are offered. Even a difference of 0.5% can be worth thousands a year on a typical loan.
2. Your fixed rate is ending. When a fixed term ends, loans usually roll onto a higher variable rate.
3. Your property has gone up in value. More equity can mean a lower loan-to-value ratio (LVR), which can unlock better rates or remove the need for LMI.
4. You want to consolidate debts. Rolling car loans or credit cards into your mortgage can lower repayments, though you should be careful about paying them off over 30 years.
5. You need cash for renovations or investing. Refinancing can release equity.
6. Your loan lacks features you want, such as an offset account or the ability to make extra repayments.

How much could you save?

On a $550,000 loan with 25 years remaining, moving from 6.69% to 5.99% would cut repayments by roughly $240 a month. That is close to $3,000 a year, and tens of thousands over the life of the loan. Your figures will depend on your balance, rate and term.

The costs of refinancing

Switching is not free. Typical costs include:

• Discharge fees from your current lender
• Application, valuation and settlement fees with the new lender (often waived)
• Government fees to register and discharge the mortgage
• Break costs if you leave a fixed rate early, which can be significant
• LMI if you borrow more than 80% of the property value

Some lenders offer cashback to new customers, which can offset these costs. But do not choose a loan only for the cashback. A lower ongoing rate is usually worth more.

When refinancing may not make sense

• You are in a fixed rate with high break costs
• Your loan balance is small or nearly paid off, so the savings will not cover the costs
• Your income or employment has recently changed and you may not pass a new lender's assessment
• Your property value has fallen and your LVR is now above 80%

Try asking your current lender first

Sometimes a phone call is enough. Tell your lender you are considering refinancing and ask for a better rate. If they will not move, or the new rate is still uncompetitive, it is time to compare.

How refinancing works, step by step

1. Review your current loan: balance, rate, fees and any fixed rate end date.
2. Compare lenders based on the total cost, not just the headline rate.
3. Apply. The new lender checks your income, expenses and credit history and values the property.
4. Approval and documents. You sign the new loan contract and a discharge form for your old lender.
5. Settlement. The new lender pays out the old loan. This usually takes two to four weeks.

Keep your repayments the same

A simple trick: if you refinance to a lower rate, keep paying what you paid before. The extra goes straight to your principal and can take years off your loan.

Let us do the comparing

We compare your current loan against more than 50 lenders and handle the switch if there is a better deal. Learn more about refinancing with Propple or book a free call.

This article is general information only and does not take into account your objectives, financial situation or needs. Government schemes, tax rules and lender policies change, so check current details before acting. Propple Pty Ltd is an Australian Credit Representative (537767) of AFSL 384704.