How to Refinance Your Home Loan in Australia (2026)

What Is Refinancing?

Refinancing means replacing your current home loan with a new one, either with a different lender or with the same lender on different terms. The new loan pays out the old one, and you continue making repayments on the new loan going forward.

The most common reason Australians refinance is to get a lower interest rate. Even a small rate reduction can save significant money over the life of a mortgage because home loans are large and long term. But refinancing can also be used to: access equity for renovations or other investments, consolidate debts, change loan features (for example, adding an offset account), switch from a variable rate to a fixed rate (or vice versa), or move from interest only to principal and interest repayments.

In Australia, there is no penalty for refinancing a variable rate home loan. You are free to switch lenders at any time, subject to the new lender approving your application. Fixed rate loans are different, as break costs may apply if you refinance during the fixed period.

When Should You Refinance?

There are several clear signals that it is time to review your home loan and consider refinancing.

Your Rate Is Above Market

If your current interest rate is more than 0.25% to 0.50% above what competitive lenders are offering for your loan type and LVR, you are paying an unnecessary premium. This is extremely common. Lenders frequently offer their best rates to new customers while existing customers (sometimes called "back book" customers) sit on higher rates. The difference can be substantial, often 0.50% to 1.00% or more.

Your Fixed Rate Period Is Ending

When a fixed rate period expires, your loan typically reverts to the lender standard variable rate, which is almost always higher than the competitive rates available in the market. The end of a fixed rate period is an ideal time to refinance because there are no break costs to worry about.

Your Financial Situation Has Improved

If your income has increased, you have paid down debt, or your property has increased in value (reducing your LVR), you may now qualify for better rates than when you originally took out your loan. A borrower who originally borrowed at 90% LVR and has since reduced to 75% LVR could be eligible for a significantly lower rate tier.

You Need to Access Equity

If you want to use the equity in your home for renovations, an investment property deposit, or another purpose, refinancing allows you to increase your loan amount and access the cash. This is often cheaper than taking out a separate personal loan because home loan rates are significantly lower.

You Want Different Loan Features

If your current loan lacks features you now need (such as an offset account, redraw facility, or the ability to make extra repayments without penalty), refinancing to a loan with these features can be worthwhile, provided the overall cost is competitive.

How Much Could You Save by Refinancing?

The potential savings from refinancing depend on three factors: the rate difference, your loan balance, and the remaining loan term.

To put this in perspective: a borrower with a $600,000 loan balance who reduces their rate by 0.75% saves approximately $4,500 per year, or $375 per month. Over the remaining 20 years of the loan, that is approximately $60,000 in total interest saved. Even after accounting for refinancing costs of $500 to $1,500, the net saving is substantial.

The rule of thumb is simple: if the annual interest saving exceeds the total cost of refinancing, it makes financial sense to switch. For most borrowers, a rate improvement of 0.25% or more on a loan above $300,000 will break even within the first year.

The Refinancing Process: Step by Step

Refinancing follows a similar process to applying for a new home loan, but with the added step of discharging your existing loan.

Step 1: Review Your Current Loan

Start by understanding your current position. Check your current interest rate (look at your latest statement or log into your lender online banking), your outstanding loan balance, your current property value (a rough estimate is fine at this stage), any features you want to keep or add, and whether you are in a fixed rate period (which may involve break costs).

Step 2: Compare Options

Compare rates and features from multiple lenders. A mortgage broker can do this for you across 30 to 60 or more lenders in a single consultation. If you prefer to research independently, focus on lenders that offer competitive rates for your specific LVR tier and loan type.

Step 3: Apply With the New Lender

Submit a full application with the new lender. You will need to provide: identification, income verification (payslips, tax returns, or BAS for self employed), details of your current loan and property, bank statements showing your financial position, and details of any other debts or financial commitments.

Step 4: Valuation

The new lender will order a valuation of your property. This is used to confirm the property value and calculate your LVR. Most lenders use automated (desktop) valuations for refinances where the LVR is below 80%, which is faster and cheaper than a full physical inspection.

Step 5: Formal Approval and Loan Documents

Once your application is approved, the new lender issues loan documents. Review them carefully (or have your broker review them) and sign and return them. The new lender will also coordinate the discharge of your existing loan with your current lender.

Step 6: Settlement

On settlement day, the new lender pays out your old loan and registers a new mortgage over your property. This is handled electronically via the PEXA platform in most states. You do not need to attend or do anything on the day itself. Your first repayment to the new lender will be due approximately one month after settlement.

Costs of Refinancing

Refinancing is not free, but the costs are typically modest compared to the potential savings.

Discharge Fee (Current Lender)

Your current lender will charge a discharge fee to close your loan and release their mortgage. This is typically $150 to $400. It is a standard administrative cost and is unavoidable.

Application or Establishment Fee (New Lender)

Some lenders charge an application or establishment fee for the new loan, typically $0 to $600. Many competitive lenders waive this fee entirely, especially for refinancers.

Valuation Fee

The new lender may charge for the property valuation. This ranges from $0 (many lenders waive valuation fees for refinancers or use free automated valuations) to $300 for a full valuation. For high value properties, the cost may be higher.

Government Fees

You will need to pay mortgage registration and deregistration fees to the state government land titles office. These are typically $150 to $250 in total, depending on the state.

Break Costs (Fixed Rate Loans Only)

If you are refinancing out of a fixed rate loan during the fixed period, your current lender may charge break costs. These can range from a few hundred dollars to tens of thousands of dollars, depending on the remaining fixed term and the difference between your fixed rate and the current wholesale rate. Always request a break cost estimate before proceeding.

Lenders Mortgage Insurance (If Applicable)

If your LVR is above 80% with the new lender, you may need to pay LMI again. This is a significant cost (potentially thousands of dollars) and should be carefully weighed against the refinancing benefit. Some lenders offer LMI waivers for refinancers or for certain professions.

Refinancing Cashback Offers: Are They Worth It?

Many lenders offer cashback incentives (typically $2,000 to $4,000) to attract refinancers. These can be attractive, but they should not be the primary reason for choosing a lender.

A $3,000 cashback on a loan with a rate that is 0.20% higher than the best available rate costs you more than $3,000 in additional interest over the first three years on a $500,000 loan. Always compare the ongoing rate and features first, then treat the cashback as a bonus rather than the main attraction.

Also be aware that cashback offers often come with conditions: minimum loan size requirements, clawback provisions if you refinance away within a set period (usually 2 to 4 years), and restrictions on combining cashback with other promotions or rate discounts.

Negotiating With Your Current Lender

Before committing to a refinance, it is worth giving your current lender the opportunity to match the market. Many lenders have retention teams whose job is to keep existing customers, and they have the authority to offer rate discounts that are not available through normal channels.

How to Negotiate Effectively

1. Know what is available. Get a formal rate quote or pre approval from a competitive lender. This gives you a specific number to present, not just a vague request for a better deal.
2. Call the retention team. Ask to speak to the retention or customer loyalty team, not the general customer service line. Retention staff have more authority to offer discounts.
3. Be specific. Tell them your current rate, the rate you have been offered elsewhere (and by whom), and ask them to match or beat it. Be polite but direct.
4. Be prepared to follow through. If your lender cannot match the market, be prepared to actually refinance. An empty bluff undermines your negotiating position in the future.

Refinancing Out of a Fixed Rate Loan

Refinancing during a fixed rate period is possible but requires careful analysis because of potential break costs.

Break costs are charged by lenders to compensate them for the interest they lose when you exit a fixed rate contract early. The calculation is complex and depends on: the remaining fixed term, the difference between your fixed rate and the current wholesale swap rate, and your loan balance. When wholesale rates have fallen significantly since you fixed, break costs can be very high (sometimes tens of thousands of dollars). When wholesale rates have risen, break costs may be minimal or zero.

Before refinancing out of a fixed rate, request a formal break cost estimate from your lender. Then calculate whether the ongoing rate saving from refinancing exceeds the break cost over a reasonable period (typically 2 to 3 years). If the break cost is $5,000 but the rate saving is $4,000 per year, you will be ahead within 15 months.

If break costs are prohibitively high, consider waiting until the fixed period ends. Most fixed rate periods in Australia are 1 to 3 years, so you may not have long to wait.

Refinancing With Less Than 20% Equity

If your property has decreased in value, or you originally purchased with a small deposit and have not yet reached 20% equity, you may face challenges when refinancing.

The main issue is Lenders Mortgage Insurance (LMI). If your LVR is above 80% with the new lender, you may need to pay LMI for the second time (the LMI you paid on your original loan does not transfer). This can add thousands to the cost of refinancing and may wipe out any rate saving.

Options for Low Equity Refinancers

• LMI waiver lenders. Some lenders offer LMI waivers for certain professionals (doctors, dentists, lawyers, accountants, engineers) at LVRs up to 85% or 90%.
• Refinance cashback to offset LMI. If the LMI cost is modest and a lender is offering a generous cashback, the numbers may still work in your favour.
• Negotiate with your current lender instead. If your equity position prevents a cost effective refinance, use a competing offer to negotiate a rate reduction with your existing lender. This avoids all switching costs entirely.
• Wait and build equity. If you are close to the 80% LVR threshold, it may be worth making extra repayments for a few months to reach 80% before refinancing. This eliminates the LMI cost entirely.

Common Refinancing Mistakes

• Extending your loan term. When you refinance, many lenders default to a new 30 year term. If you have already been paying your current loan for 5 years, extending to a new 30 year term means you are now paying for 35 years total. Keep your remaining term the same (or shorter) when refinancing to avoid paying more interest in the long run, even if it means slightly higher monthly repayments.
• Focusing on cashback over rate. A $3,000 cashback is appealing but a poor long term trade if the ongoing rate is 0.20% or more above the best available. Always prioritise the rate and features over short term incentives.
• Not accounting for all costs. Include discharge fees, government fees, potential LMI, and any establishment fees when calculating whether refinancing is worthwhile. These costs are usually modest, but they need to be factored in.
• Refinancing too frequently. Switching lenders every 12 months to chase the latest cashback or promotional rate can become counterproductive. Each refinance involves costs and administrative effort. Find a lender with a consistently competitive rate and good service, and stay with them unless there is a meaningful reason to move.
• Drawing equity unnecessarily. Refinancing provides an opportunity to access equity, but increasing your loan balance for non essential spending (holidays, consumer goods) is rarely wise. You are converting short term spending into 25 to 30 years of interest payments.
• Not checking your credit file first. Before applying to a new lender, check your credit report for any errors or surprises. An unexpected default or credit inquiry can affect your application. You can check your credit report for free through Equifax, Experian, or illion.