Refinancing
Refinancing means replacing your existing mortgage with a new one. This might involve staying with your current lender but negotiating a better rate or restructuring the loan, or it might mean moving to a different bank entirely. The goal is almost always to improve your financial position, whether through a lower interest rate, reduced fees, a different loan structure, or accessing equity for another purpose.
The refinancing process typically involves a full reassessment of your financial position, similar to a new mortgage application. Your income, expenses, existing debts, and property value will all be reviewed. If your circumstances have improved since you originally borrowed, or if property values have risen and increased your equity, you may be in a stronger position than when you first applied and able to access better terms.
Timing is important. If you are mid-way through a fixed-term loan, breaking early to refinance will likely trigger a break fee, which needs to be weighed against the savings from the new rate. The best time to refinance without a break fee is at the end of a fixed term, when the loan is rolling to a floating rate or when a new term is being set. Many experienced borrowers treat the end of each fixed term as an opportunity to shop around.
Refinancing to a lower rate directly reduces your monthly repayments and the total interest paid over the life of the loan. However, the costs involved, including break fees, legal fees, and any discharge fees from your current lender, can reduce or eliminate the short-term benefit. The longer you have remaining on your loan, the greater the potential long-term benefit of refinancing to a meaningfully better rate, since the saving compounds over more years.
See how this affects your numbers
Run the mortgage calculator to see how refinancing plays out in your specific situation.