If you haven't reviewed your home loan in the past 12 months, there's a good chance you're paying more than you need to. Australian banks often offer their best rates to new customers while quietly leaving loyal existing customers on higher rates, a practice sometimes called the "loyalty tax."

This guide explains when refinancing makes sense, what it involves, and how to do it without stress.

What Is Refinancing?

Refinancing means replacing your current home loan with a new one, either with a different lender or with your existing lender on better terms. The goal is usually to:

Reduce your interest rate (and therefore your repayments)

Access equity (for renovations, investment, or other purposes)

Change loan features (add an offset account, switch fixed/variable)

Consolidate debts (roll personal loans or credit cards into your home loan)

Change your loan structure (extend or shorten the term)

Signs It Might Be Time to Refinance

Your interest rate starts with a 3 or 4 and current market rates start with a 5 or lower for your LVR level

You're on a revert rate (your fixed period has expired and you've rolled onto a higher variable rate)

You've been with the same lender for 3+ years without a review

Your property value has increased and you now have more than 20% equity

You've had a pay rise or income improvement that allows better options

You want features your loan doesn't have (like an offset account)

How Much Could You Save?

Here's a rough illustration of the potential savings from refinancing:

| Loan Balance | Rate Reduction | Annual Saving | 10-Year Saving | |---|---|---|---| | $400,000 | 0.5% | ~$2,000 | ~$20,000 | | $500,000 | 0.5% | ~$2,500 | ~$25,000 | | $600,000 | 0.75% | ~$4,500 | ~$45,000 | | $800,000 | 0.75% | ~$6,000 | ~$60,000 |

Note: Savings are illustrative only and vary based on repayment type and compounding.

Use our Repayment Calculator to run your own numbers.

The Costs of Refinancing

Refinancing isn't free, but the costs are usually far outweighed by the savings. Common costs include:

Discharge fee: $150–$400 (charged by your existing lender)

Government registration fees: ~$150–$200 (varies by state)

Break costs: Can be significant if you're mid-way through a fixed rate period

Establishment fees: Many lenders charge $0 these days; some charge up to $600

Valuation fee: $0–$300 (some lenders waive this)

Cashback deals: Many lenders currently offer $2,000–$4,000 cashback for refinancers. This can completely offset your switching costs.

Understanding Your Break-Even Point

The break-even point is how long it takes for your monthly savings to exceed your refinancing costs. For example:

Refinancing costs: $1,500

Monthly saving: $200

Break-even: 7.5 months

After 7.5 months, you're ahead. After 5 years, you've saved $12,000 minus costs = $10,500 net.

We calculate this precisely for every client before recommending refinancing.

The Refinancing Process Step-by-Step

Step 1: Rate Review (Week 1)

Step 2: Options Presented (Week 1)

We present you with 2–3 shortlisted options showing rate, fees, features, cashback, and net savings after costs.

Step 3: Application Submitted (Week 2)

Once you choose a lender, we submit your application. You'll need to provide updated payslips, bank statements, and ID.

Step 4: Approval (Week 2–3)

The new lender assesses your application. They'll arrange a valuation of your property.

Step 5: Discharge & Settlement (Week 3–4)

We manage the discharge of your existing loan. Your new loan settles, and you start saving.

Total time: typically 2–4 weeks from decision to completion.

Accessing Equity When Refinancing

If your property has increased in value since you bought it, you may have usable equity: the difference between the property's current value and your outstanding loan balance (factoring in an 80% LVR limit for standard lending).

Example:

Property value: $750,000

Outstanding loan: $450,000

Maximum 80% LVR loan: $600,000

Usable equity: $600,000 - $450,000 = $150,000

This equity can be used for renovations, an investment property deposit, education, or other purposes. We'll structure the refinance to release the equity cleanly.

When NOT to Refinance

Refinancing isn't always the right move:

You're about to sell: If selling within 12 months, refinancing costs probably won't be recovered

You have significant break costs: Sometimes it's better to wait out a fixed term

Your financial situation has deteriorated: A lower income or more debt might mean you can't refinance to a better rate. Fix the finances first.

The savings are minimal: If the rate difference is tiny, it may not be worth the effort

Frequently Asked Questions

Will refinancing affect my credit score? A single credit enquiry has minimal impact. Avoid applying to multiple lenders directly: that's where damage accumulates. We apply to one targeted lender.

Can I refinance with the same lender? Yes. This is called a variation or product switch. It's faster and cheaper but usually doesn't get you as competitive a rate as switching lenders. We negotiate on your behalf.

What if I have a bad credit history? Some specialist lenders work with impaired credit histories. The rates are higher but refinancing might still improve your situation. Talk to us.

Ready for a Free Rate Review?

Book a 15-minute call with our team. We'll tell you whether refinancing makes sense for you, and if not, why not.

Book a Free Rate Review

When and How to Refinance Your Home Loan in 2025