Refinancing your home loan: a step-by-step checklist
When it's worth switching, what it costs, and how to ask your bank for a better rate first.
Key points
- A 0.5 point lower rate on $550,000 saves about $175 a month.
- Ask your current lender to match a better rate before you switch.
- Typical switching costs are $500 to $1,500, plus break costs on fixed loans.
- With less than 20% equity you may pay LMI again.
- Keep your old repayment amount to pay the loan off faster.
Many Australians pay more than they need to on their home loan simply because they haven't asked. Lenders often save their sharpest rates for new customers, so a loan that was competitive a few years ago may now be well above the market. Here's how to check, what it costs to switch, and the steps to follow.
Work out what refinancing saves
What a lower rate is worth
On a $550,000 balance with 27 years left:
| Rate cut (points) | Saving a month | A year | Over 5 years |
|---|---|---|---|
| 0.25 | $88 | $1,056 | $5,282 |
| 0.50 | $175 | $2,101 | $10,506 |
| 0.75 | $261 | $3,134 | $15,671 |
| 1.00 | $346 | $4,155 | $20,777 |
Moving from 6.69% to 6.14% saves about $192 a month. With switching costs of about $1,200, you'd be ahead after roughly 6 months.
Step 1: ask your current lender first
Find the best advertised rate for a loan like yours (see home loan rates), then call your lender's retention team and ask them to match it. Many will cut your rate on the spot, with no paperwork. If they won't, you have your answer.
Step 2: check whether refinancing makes sense
- Equity: if you owe more than 80% of the home's value, a new lender may charge lenders mortgage insurance again, which can wipe out the saving. See the LMI calculator.
- Fixed loans: breaking a fixed rate early can mean break costs. Ask your lender for a quote.
- Your situation: lenders reassess your income, expenses and debts, using a rate about 3 points higher than the loan rate. If your income has fallen or rates have risen, you may not qualify for as much as before.
Costs to expect
| Cost | Typical amount |
|---|---|
| Discharge fee (old lender) | $150 to $400 |
| Government fees to discharge and register the mortgage | About $150 to $400 each, depending on the state |
| Application or establishment fee (new lender) | $0 to $800; often waived |
| Valuation and settlement fees | $0 to $500 |
| Break cost (fixed loans only) | Nil to thousands |
| LMI (if your LVR is over 80%) | Thousands |
Exit fees on loans taken out since 1 July 2011 are banned, but discharge fees are still allowed. Some lenders offer cashback to refinancers; it helps, but a lower rate usually matters more over time.
Step 3: the paperwork
- Gather recent payslips (or tax returns if self-employed), bank statements, your current loan statement and ID.
- Apply with the new lender or through a broker.
- Sign a discharge authority with your old lender. The new lender arranges settlement, usually in 2 to 4 weeks.
- Keep repayments going on the old loan until settlement.
Don't lose the saving
- Keep your repayments the same. Paying the old amount on a lower rate pays the loan off years sooner.
- Don't extend the term back to 30 years unless you need lower repayments; it adds a lot of interest.
- Set a reminder to check your rate again in a year.
Frequently asked questions
How much does it cost to refinance a home loan?
Often $500 to $1,500 in discharge, government and setup fees, more if you break a fixed rate or have to pay LMI. Some lenders waive setup fees or offer cashback.
When is refinancing worth it?
When the saving covers the costs within a year or two. A 0.5 point lower rate on a $550,000 loan saves about $175 a month, so typical costs are recovered in months.
Can I refinance with less than 20% equity?
Yes, but you'll usually pay lenders mortgage insurance again, which can cancel out the saving. Some lenders waive LMI for certain professions.
Does refinancing affect my credit score?
A new application appears on your credit report, but one application has little effect. Avoid applying with many lenders at once.
Sources
- Moneysmart: debt consolidation and refinancing
- Moneysmart: choosing a home loan
- Moneysmart: home loans
More guides
Last reviewed October 2026. This guide is general information only. It isn't financial, tax, credit or legal advice and doesn't consider your circumstances. Rules change, so check the official sources below or speak to a licensed professional before you make a decision.