Refinancing Your Home Loan in Australia: When It Makes Sense (and When It Doesn't)
A practical guide to refinancing your mortgage in Australia. Learn when to refinance, how much you could save, break costs to watch for, and how to compare lenders in 2026.
Refinancing Your Home Loan in Australia: When It Makes Sense (and When It Doesn't)
Refinancing — switching your existing home loan to a new lender or product — is one of the most powerful financial moves an Australian homeowner can make. According to the ABS, Australians refinanced over $18 billion in home loans in a single month during 2025. Yet many borrowers stay on rates 0.5–1.0% higher than necessary simply because they never checked.
This guide walks through everything you need to know about refinancing in 2026.
What Is Refinancing?
Refinancing means replacing your current home loan with a new one — either with the same lender (an internal refinance or "rate match") or a different lender (an external refinance). The new loan pays off the old one, and you start fresh with new terms.
Common Reasons Australians Refinance
- Lower interest rate — the most common reason, often saving $200–$500+ per month
- Access equity — borrowing against the increased value of your home for renovations, investment, or debt consolidation
- Better features — offset accounts, redraw facilities, flexible repayments
- Switch loan type — moving from fixed to variable (or vice versa) as market conditions change
- Consolidate debt — rolling credit cards or personal loans into the mortgage at a lower rate
When Does Refinancing Make Financial Sense?
The Break-Even Rule
Refinancing has costs — typically $500–$2,000 for a straightforward switch. The key question: will your monthly savings exceed these costs within a reasonable timeframe?
Quick calculation:
| Your Loan | Current Rate | New Rate | Monthly Saving | Break-Even |
|---|---|---|---|---|
| $500,000 | 6.50% | 5.90% | ~$195/mo | ~6 months |
| $700,000 | 6.30% | 5.80% | ~$225/mo | ~5 months |
| $400,000 | 6.80% | 6.20% | ~$145/mo | ~8 months |
If you break even within 12 months, refinancing almost always makes sense.
Green Flags for Refinancing
- Your rate is 0.3%+ above market — check the RBA cash rate and compare
- Your fixed rate period is ending — lenders often revert you to a higher variable rate
- Your home has increased in value — lower LVR may qualify you for better rates
- You've been with the same lender 3+ years — loyalty is rarely rewarded in Australian banking
- You want to access equity — if your home value has risen and you need funds
Red Flags — When NOT to Refinance
- You're still in a fixed rate period — break costs can be $10,000–$50,000+
- Your loan balance is under $200,000 — savings may not justify the effort
- You've changed jobs recently — lenders want 6+ months employment history
- You've had recent credit issues — new applications trigger credit checks
The Refinancing Process: Step by Step
Step 1: Check Your Current Loan
Log into your lender's portal and note your:
- Current interest rate (variable or fixed)
- Outstanding balance
- Remaining term
- Any exit fees or discharge fees
- Fixed rate expiry date (if applicable)
Step 2: Compare the Market
Use CREDIGO's free borrowing power calculator to see what you qualify for, then compare rates across lenders.
Key comparison points:
- Comparison rate (not just the headline rate) — this includes fees
- Offset account availability and any monthly fees
- Ongoing fees — annual fees, monthly fees, redraw fees
- Cashback offers — some lenders offer $2,000–$4,000 cashback
Step 3: Apply for the New Loan
You'll need:
- Last 2 payslips or tax returns (self-employed)
- 3 months of bank statements
- Current loan statements
- ID documents
- Property details
Step 4: Settlement
The new lender pays off your old loan directly. This typically takes 4–8 weeks. You don't need to do anything except sign the paperwork.
Costs to Watch For
| Cost | Typical Amount | Notes |
|---|---|---|
| Discharge fee (old lender) | $150–$400 | To release the mortgage |
| Application fee (new lender) | $0–$600 | Many lenders waive this |
| Valuation fee | $0–$500 | Often free with the new lender |
| Government fees | $150–$300 | Mortgage registration/discharge |
| Break costs (fixed rate) | $0–$50,000+ | Only if breaking a fixed rate early |
| LMI (if LVR > 80%) | $1,000–$30,000+ | Usually not transferable |
Pro tip: Many lenders offer to cover your switching costs as part of a cashback deal. Always ask.
Fixed vs Variable: What to Choose When Refinancing
In 2026, with the RBA cash rate at its current level, the choice depends on your risk tolerance:
- Variable rate: More flexibility, can make extra repayments, benefits from rate cuts
- Fixed rate: Certainty for 1–5 years, but break costs apply if you want to leave early
- Split loan: Fix a portion (say 60%) and leave the rest variable — a popular middle ground
How a Mortgage Broker Can Help
A mortgage broker compares loans across 30+ lenders and handles the paperwork for you — at no cost (they're paid by the lender). This is particularly valuable if:
- You're time-poor
- You're self-employed or have complex income
- You want to compare across the whole market, not just one bank
CREDIGO connects you with verified mortgage brokers who specialise in refinancing.
Key Takeaways
- Check your rate annually — the Australian mortgage market is competitive
- Calculate break-even before committing — refinancing costs should be recovered within 12 months
- Watch for break costs on fixed rate loans
- Use a broker to compare across the full market
- Don't forget comparison rates — headline rates can be misleading
CREDIGO provides general information only. This is not financial advice. Speak with a licensed mortgage broker or financial adviser before making lending decisions.