How to Refinance Your Home Loan in Australia: A Step-by-Step Guide

Quick Answer

Refinancing means replacing your existing home loan with a new one — either with your current lender or a different one — usually to get a lower interest rate, reduce your repayments, or access equity. In Australia, refinancing is straightforward but does carry some costs, and it only makes sense when the savings outweigh the fees. With the RBA cutting rates in 2026, many borrowers are in a strong position to refinance and reduce what they pay each month.

What Does Refinancing Mean?

When you refinance, you take out a new home loan that pays off your existing mortgage. Your new loan may have a lower interest rate, different features (such as an offset account or redraw facility), a shorter or longer term, or a combination of these changes.

You can refinance with your existing lender — this is sometimes called a loan variation or internal refinance — or switch to a completely new lender. Switching lenders usually offers more competitive rates, since lenders tend to reserve their best deals for new customers rather than rewarding loyalty.

Refinancing is available to owner-occupiers and investors. The assessment process is similar to getting a new loan: the new lender will check your income, expenses, and the current value of your property.

When Should You Refinance?

There is no single trigger that tells you it is time to refinance, but several situations commonly make it worthwhile:

Your rate is above market. If your current interest rate is 0.5% or more above what new customers are being offered, refinancing is likely to save you money. Use a comparison website or speak to a broker to benchmark your rate.

Your fixed rate period is ending. When a fixed term expires, borrowers roll onto the lender's standard variable rate, which is often uncompetitive. This is one of the most common — and financially impactful — times to refinance.

Your financial position has improved. If your income has grown, your loan-to-value ratio (LVR) has dropped below 80%, or you have paid down debt since your original application, you may now qualify for a better rate than when you first borrowed.

You want different loan features. If you want to add an offset account, split your loan between fixed and variable, or consolidate other debts into your mortgage, refinancing gives you the opportunity to restructure.

You need to access equity. If your property has increased in value, you may be able to refinance and draw on built-up equity for renovations, investment, or other purposes.

How Much Could You Save?

The savings from refinancing depend on your loan balance, the rate difference, and how long you have left on your loan.

As a rough guide: on a $600,000 loan with 20 years remaining, reducing your interest rate by 0.5% saves approximately $170 per month — or around $2,000 per year. Over the remaining loan term, that compounds into a substantial sum.

Use an online refinancing calculator to model your specific situation. Input your current balance, remaining term, current rate, and the rate you're being offered, then compare the monthly saving against the cost to switch.

How to Refinance: Step by Step

1. Review Your Current Loan

Before approaching new lenders, understand what you have. Note your current interest rate, loan balance, remaining term, whether you're on a fixed or variable rate (and when any fixed period ends), and any exit fees or break costs that apply.

2. Compare Your Options

Research rates from other lenders. A mortgage broker can compare dozens of lenders at once and often access deals not available directly to the public. Look at the comparison rate — not just the headline rate — as it includes fees and gives a more accurate picture of the true cost.

3. Get an Indicative Approval

Once you've identified a competitive loan, apply for conditional or indicative approval with the new lender. They'll assess your income, living expenses, existing debts, and the current value of your property.

4. Get a Property Valuation

The new lender will order a valuation of your property. This determines your current LVR. If your property has grown in value since you bought it, you may now sit comfortably below the 80% LVR threshold — which typically unlocks the best rates and removes the need for lenders mortgage insurance.

5. Formal Approval and Loan Documents

Once approved, the new lender issues loan documents. Review these carefully — check the interest rate, loan term, repayment type (principal and interest or interest only), and any fees. Sign and return them.

6. Settlement

The new lender pays out your existing loan on settlement day. Your old loan is closed, and you begin repaying the new one. The process from application to settlement typically takes two to six weeks.

7. Notify Your Old Lender

Some lenders will match a competitor's rate rather than lose your business. It is worth calling your current lender once you have a formal offer from a competitor — they may counter with a rate reduction that makes switching unnecessary.

What Does Refinancing Cost?

Refinancing is not free. Common costs include:

Discharge fee: Your existing lender charges this to close the loan. Typically $150 to $400.

Break costs (fixed loans only): If you're breaking a fixed rate loan before the term ends, break costs can be substantial — sometimes thousands of dollars. Always calculate this before proceeding.

Application or establishment fee: Some new lenders charge an upfront fee to set up the loan. Many do not — check before applying.

Settlement fee: A legal or settlement fee charged by the new lender, typically $150 to $300.

LMI (if LVR is above 80%): If your equity is below 20%, you may need to pay lenders mortgage insurance again on the new loan. This can significantly reduce or eliminate the financial benefit of switching.

Stamp duty: Not payable on refinancing in most states — only on the original purchase.

As a rule of thumb, refinancing costs total $1,000 to $2,000 in the most common scenarios. If your annual saving is $2,000, you typically break even within the first year.

Fixed vs Variable When Refinancing

The choice between fixed and variable at the point of refinancing matters more than many borrowers realise.

Variable rate: Moves with the RBA cash rate. In a falling rate environment, variable borrowers benefit automatically. Offset accounts and redraw facilities are standard.

Fixed rate: Provides certainty for the fixed period, but you will not benefit if rates continue to fall, and break costs apply if you exit early.

Split loan: Many borrowers fix a portion (say 50%) and leave the remainder variable. This gives partial protection against rate rises while retaining flexibility.

Given the RBA's current rate-cutting cycle, most borrowers refinancing in 2026 are either staying variable or taking a short fixed term of one to two years.

Common Refinancing Mistakes to Avoid

Not accounting for break costs. Breaking a fixed loan at the wrong time can cost more than you save. Always get a break cost quote from your current lender first.

Resetting to a 30-year term. If you have 20 years left and refinance to a new 30-year loan, your repayments drop — but your total interest bill increases. Refinance to a term that matches your remaining years unless you have a specific reason to extend.

Chasing the headline rate. A low rate with high fees or poor features may cost more than a slightly higher rate on a better product. Always compare using the comparison rate and read the product disclosure statement.

Not using a broker. Brokers access a wide panel of lenders, handle much of the paperwork, and are paid by the lender rather than you. For most borrowers, using a broker costs nothing and saves time.

Refinancing Checklist

• Check your current interest rate against what new customers are being offered by your lender
• Request a break cost quote if you are on a fixed rate loan
• Note your current loan balance, remaining term, and any features you want to keep or change
• Use a mortgage broker or comparison site to identify the most competitive loans for your LVR
• Get a conditional approval and property valuation from your preferred new lender
• Calculate total switching costs and compare against your projected annual saving
• Call your existing lender with a competitor offer — they may match or come close
• Review loan documents carefully before signing, focusing on rate, term, and fees

Key Takeaways

• Refinancing replaces your current home loan with a new one to get a better rate, different features, or access to equity
• The biggest savings come from switching lenders rather than renegotiating with your existing one
• Costs typically run $1,000 to $2,000 for a straightforward variable-to-variable refinance
• Break costs on fixed loans can be substantial — always check before proceeding
• Avoid resetting to a longer loan term unless you have a clear reason to do so
• A mortgage broker can compare dozens of lenders and handles most of the process at no direct cost to you

Frequently Asked Questions

How long does refinancing take in Australia? From application to settlement, refinancing typically takes two to six weeks. A straightforward application with a clean credit file and organised documentation is at the faster end of that range.

Will refinancing affect my credit score? Each formal loan application creates a credit enquiry, which has a small and temporary effect on your credit score. Multiple applications in a short period can have a more noticeable impact, so try to narrow your shortlist before applying formally.

Can I refinance if I have less than 20% equity? Yes, but you will likely need to pay lenders mortgage insurance again on the new loan, which can significantly reduce the financial benefit. Most refinancers benefit from waiting until their LVR is below 80%.

Can I refinance an investment property? Yes. The process is the same as for an owner-occupied loan, though some lenders have different criteria and rates for investment loans. An investment property refinance may also trigger a new valuation that affects how much equity you can access.

What is a cashback refinance offer? Some lenders offer cash payments — typically $2,000 to $4,000 — to borrowers who switch to them. These can offset switching costs, but the loan rate and features still need to stack up. Do not refinance to a higher rate for a cashback.

Compare Your Options Before You Switch

Understanding your current loan and what alternatives exist is the first step. Marketli's suburb and property data helps you understand the value of your asset — a key input when approaching lenders about your LVR and equity position.

Explore property data on Marketli