Refinancing your home loan: when it actually saves you money
A lower monthly repayment is not the same as a cheaper loan. Refinancing can save you tens of thousands of dollars, or quietly cost you more, and the difference usually comes down to three numbers: the rate, the switching costs and the years left on the loan.
Four reasons people refinance
- A lower interest rate. Variable rates on the market can differ by more than two percentage points, so a loan you have not reviewed in a few years may no longer be competitive.
- Better features, such as an offset account or the ability to split the loan.
- Access to equity for a renovation or the deposit on an investment property.
- Rolling a fixed-rate period that is ending onto a better deal, rather than drifting onto the lender's revert rate.
It is also worth asking your current lender for a better rate first. Sometimes one phone call gets you part of the way, without any switching costs.
The costs to count before you switch
Refinancing is not free. Which of these apply depends on your current loan and your new lender, so check each one in writing.
- Discharge fee: charged when you close your current loan.
- Break fee: you may have to pay this if you are leaving a fixed rate early, and it can be large.
- Application or settlement fees with the new lender, although some lenders waive them.
- Government registration fees for changing the mortgage on the title.
- Lenders Mortgage Insurance, if your equity is under 20%. LMI can outweigh the savings on its own.
If you paid LMI on your current loan, it generally does not transfer to the new lender. Ask your current lender whether a partial refund applies, and include any new LMI in your sums.
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How to work out your break-even
Divide your total switching costs by your monthly saving. That tells you how many months it takes to get your money back. If you may sell or refinance again before that point, the switch may not be worth it.
Illustration only: on a $650,000 loan with 25 years left, moving from 6.20% to 5.70% drops the monthly repayment from about $4,268 to about $4,070, a saving of about $198 a month. With $1,500 in switching costs, you would break even in about 8 months. These rates are examples, not offers.
The trap: resetting your loan term
This is the mistake that makes refinancing look better than it is. Take the same loan and new rate, but stretch the remaining 25 years onto a fresh 30-year term. The repayment falls to about $3,773, so the monthly "saving" appears to jump to about $495.
- Stay on 6.20% for 25 years: about $630,000 in total interest.
- Move to 5.70% and keep 25 years: about $571,000, roughly $59,000 less.
- Move to 5.70% but reset to 30 years: about $708,000, roughly $78,000 more than not switching at all.
A lower rate with a longer term can leave you paying more overall. When you compare offers, keep the term close to the years you have left, or keep paying your old repayment amount if your new loan allows extra repayments.
When refinancing may not be worth it
- You are still in a fixed period and the break fee wipes out the saving.
- Your equity is under 20% and you would pay LMI again.
- Your income has dropped or changed recently. A new application means being assessed again, and you may not qualify on the same terms.
- You plan to sell before you would break even.
Self-employed or running your income through a company or trust? You can still refinance, but the new lender will assess your income its own way, so it pays to check that before you apply.
Refinancing an investment property
If you are refinancing to release equity for your next purchase, how the loan is set up matters as much as the rate. Our team can look at the loan with you, and if you buy an investment property through us, new clients can receive up to 12 months of free property management. Conditions apply.
Frequently asked questions
How often should I review my home loan?
A common habit is to review your rate from time to time, and always when a fixed period is ending or your circumstances change. Reviewing does not commit you to switching.
Does refinancing affect my credit score?
A new application normally appears on your credit file. One considered application is different from several in a short period, so it is sensible to narrow your options before you apply.
How long does refinancing take?
It varies by lender and by how complex your finances are, so allow several weeks. Your broker can give you a better idea once your lender and documents are known.
Can I refinance if I am self-employed?
Yes, subject to the new lender's criteria. You will need to show your income again, usually with tax returns or, for some low doc products, alternative evidence such as BAS and bank statements.
Helpful tools & guides
This article is general information only and does not take into account your objectives, financial situation or needs. Interest rates shown are examples only and are not offers. Fees, lender criteria and policies change and vary between lenders. All loans are subject to lender approval. Sources: Moneysmart (ASIC), switching home loans, accessed November 2026.