When and How to Refinance Your Mortgage in Australia

If your mortgage is more than two years old, there is a good chance you are paying more than you need to. Lenders offer their best rates to new customers, which means loyal borrowers often end up on higher rates — a practice sometimes called the “loyalty tax.”

Refinancing simply means replacing your current mortgage with a new one, either from the same lender or a different one. Done well, it can save you tens of thousands over the life of your loan.

When Refinancing Makes Sense

The most common trigger is finding a lower interest rate. Even a 0.3% reduction on a $500,000 loan saves roughly $900 per year — or $27,000 over 30 years. Use our mortgage calculator to see exactly what a rate drop would mean for your repayments.

Other good reasons to refinance include accessing your home equity for renovations or other investments, switching from a variable to fixed rate (or vice versa), consolidating debts into your mortgage, changing lenders because you want better features (like an offset account), and your financial situation has improved and you now qualify for better rates.

When Refinancing Does Not Make Sense

Refinancing has costs, so it does not always pay off. Avoid refinancing if you are close to paying off your loan (the savings may not exceed the costs), you are on a fixed rate with large break costs, the costs of switching outweigh the interest savings, or you are planning to sell the property soon.

Always calculate the break-even point — how many months of savings it takes to recover the refinancing costs.

The Refinancing Process

The process is similar to applying for a new loan. You compare lenders and find a better rate, apply for the new loan with your chosen lender, the new lender arranges a valuation of your property, once approved they pay out your old loan, and you start making repayments on the new loan.

A mortgage broker can handle most of this for you, comparing options across their panel of lenders. The whole process typically takes 2 to 6 weeks.

Costs of Refinancing

There are costs on both sides. Your old lender may charge a discharge fee ($150-$400) and break costs if you are on a fixed rate (these can be thousands of dollars). Your new lender may charge an application fee ($0-$600), a valuation fee ($200-$600), and settlement fees.

Government charges include mortgage registration fees and title search fees, typically $200 to $500 combined. Many lenders offer cashback deals ($2,000-$4,000) to offset these costs, though these often come with conditions.

How Much Can You Save?

On a $500,000 loan with 25 years remaining, dropping your rate by 0.5% saves approximately $1,500 per year, $37,500 over the remaining term, and can shorten your loan by 1-2 years if you keep the same repayments.

The savings compound because with a lower rate, more of each repayment goes to principal rather than interest, which reduces the balance faster.

Cash-Out Refinancing

If your property has grown in value, you may be able to refinance for more than you currently owe and take the difference as cash. This is called cash-out refinancing or equity release.

For example, if your property is worth $800,000 and you owe $400,000, you have $400,000 in equity. Most lenders will let you borrow up to 80% of the property value ($640,000), giving you access to up to $240,000.

This can fund renovations, a deposit on an investment property, or other financial goals. Just remember that you are increasing your debt, so make sure the use of funds justifies the additional borrowing. Read our mortgage guide for more on how equity works.

Next Steps

Start by checking what rate you are currently paying versus what is available in the market. If the gap is more than 0.25%, refinancing is worth investigating.

For more on managing your mortgage, read our types of mortgages guide or check our FAQs for quick answers. Use our mortgage calculator to model the savings.