Refinancing your home loan
Refinancing means paying out your home loan with a new one, usually from a different lender, to get a lower rate, a better structure, or to release equity. It's worth it when the saving, over the time you'll keep the loan, is bigger than the cost of switching. The trap is the loan term: start a fresh 30 years on a loan that's already part-paid, and a lower rate can still cost you more in total.
When refinancing is worth it, and when it isn't
Usually worth it when your rate is well above what a new customer would pay for the same loan, you'll keep the loan long enough for the saving to pass the switching costs, and you owe 80% or less of your home's value, so a new lender usually won't charge lenders mortgage insurance again.
Usually not when you're inside a fixed rate with a large break cost, your loan settled in the last year or so, you'd owe more than 80% of the value with the new lender, or your income has changed and a new lender might lend you less than you owe.
The term reset: the cost that quietly cancels the saving
An illustration, not a client file. You owe $500,000 with 22 years left, at 6.5%. A new lender offers 6.0%. Here's what happens depending on the term you take.
| Choice | Monthly repayment | Total interest from here |
|---|---|---|
| Stay at 6.5%, 22 years left | $3,565 | $441,079 |
| Refinance at 6.0%, keep 22 years | $3,415 | $401,658 |
| Refinance at 6.0%, new 30 years | $2,998 | $579,191 |
Keeping your remaining term saves about $39,400 in interest. Taking a fresh 30 years lowers the repayment by $567 a month, but adds about $138,000 of interest compared with staying where you are. When you refinance, ask for the term you have left, not a new 30 years.
Cashback offers, and what they're really worth
An illustration, not a client file. A lender offers $3,000 cashback on a $500,000 loan at 6.2%. Another offers 6.0% with no cashback. Over 25 years, the 0.2% difference costs about $1,000 in interest each year. After three years the cashback is used up, and every year after that the cheaper rate is ahead.
So cashback is worth it only if you expect to move again within about three years. Compare the rate first, and treat cashback as a bonus, not the reason.
What it costs to refinance
Your current lender's discharge fee, for closing the loan.
Government fees to remove the old mortgage from your title and register the new one. Each state sets its own.
A break cost, if you're leaving a fixed rate early. It can be large; ask your lender for the figure in writing before you decide.
The new lender's fees, such as an application, valuation or settlement fee. Some lenders waive them.
Lenders mortgage insurance, if you'd owe more than 80% of the value with the new lender. On a refinance it's usually charged again, even if you paid it before.
Ask each lender for its fees in writing. They change, which is why this page doesn't print them.
Working out your break-even
An illustration, not a client file. On $500,000 with 25 years left, moving from 6.5% to 6.0% saves about $2,500 in interest in the first year, around $208 a month. If switching costs $1,000, you've made it back in about five months. If it costs $3,000, it takes about fourteen months.
Your break-even is the month the saving passes the cost. If you're likely to sell or move the loan again before then, refinancing loses money.
Ask your own lender first
Before you move, ask your current lender to match the rate you've found. Your lender may review your rate to keep you, and a better rate without moving costs you nothing: no discharge fee, no new valuation, no paperwork. If they won't, you've lost a phone call and gained a clear reason to move.
How refinancing works, from start to settlement
You gather your documents: your latest loan statements, payslips or tax returns, and ID.
I compare loans on your actual balance, rate and plans, and work out the break-even.
The new lender assesses the application and usually values your home.
You sign the new loan documents once it's approved.
Your old lender gets a discharge request and prepares to close the loan.
Settlement day: the new lender pays out the old loan, and your repayments move to the new one.
How long it takes depends mostly on the new lender's approval and the old lender's discharge. Your old loan keeps running until settlement, so keep paying it.
What can delay or change a refinance
A low valuation, which raises the share of the value you'd owe and can bring lenders mortgage insurance or a smaller loan.
A slow discharge from your old lender, which moves the settlement date.
A change in your income or debts since your last loan, which the new lender assesses afresh.
A government scheme you'd lose. A loan under the 5% Deposit Scheme keeps the scheme only if you move to another participating lender, without increasing the loan or extending the term.
Refinancing to release equity, or with a credit problem
Releasing equity. You can borrow more than you owe when you refinance, if your home's value and your income support it. Lenders ask what the money is for, and some limit what they'll lend for, so have the purpose and the amount clear before you apply.
With impaired credit. It's harder, not impossible. A missed payment or default narrows the lenders who'll look at it, often at a higher rate. Fixing what you can first, and knowing exactly what's on your credit file, matters more than which lender you try.
What I do when you refinance
You send your latest loan statement and tell me what you want from the loan. I compare it with what's available for someone in your position, work out the break-even, and tell you whether to stay, ask your lender for a better rate, or move. If you move, I handle the application, the paperwork with the new lender and the discharge with the old one, through to settlement.
Questions people ask before refinancing
Paying out your existing home loan with a new loan, usually from a different lender, often to get a lower rate, change the loan's structure or borrow against your equity.
Wondering whether to refinance?
Send me your latest loan statement and tell me what's changed. I'll tell you whether to stay, ask your lender for a better rate, or move, what it would save, and the month it pays for itself.
You'll hear back within the hour in business hours, and by 9am the next business day after hours.
Sources
- 1
The illustrations: Money Brain's arithmetic on the stated examples ($500,000; 6.5%, 6.2% and 6.0% a year; monthly principal and interest; 22, 25 and 30 years).
- 2
Housing Australia, 5% Deposit Scheme guide dated 1 July 2026, on refinancing. Checked 29 September 2026.
Updated 3 October 2026