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Refinancing means replacing your current home loan with a new one, either with your existing lender or a different lender. Done well, it can reduce interest, improve cash flow, or give you features that better match your life now. Done poorly, it can lock you into higher long-term costs, reset your loan term, or create cash-flow stress.
In Australia, refinancing has become common as rates, living costs and property values move around. But “cheaper rate” alone isn’t a strategy. The goal is to improve your overall position after fees, features and risks are considered.
Quick answer: when is refinancing usually worth it?
Refinancing is usually worth exploring when the benefits clearly outweigh the costs and effort, such as:
Your current rate is no longer competitive and you can access a meaningfully better deal
Your loan no longer suits your needs (e.g., you want an offset account, redraw access, or a different repayment structure)
Your equity position has improved and you may qualify for a better rate or lower lender risk pricing
You’re consolidating debts to simplify repayments (with a plan to avoid re‑building the debt)
You’re switching from a higher-risk situation (e.g., expiring fixed rate) to something more manageable
It’s often not worth it if break costs are high, the new loan’s fees and features cancel out the savings, or you’ll be tempted to extend the loan term and pay more over time.
What does refinancing actually change?
Refinancing can change more than the interest rate. Depending on the loan you choose, it may change:
Your repayment amount and repayment type (principal and interest vs interest-only, subject to lender approval)
Loan features such as offset accounts, redraw, split loans, or extra repayment flexibility
Your loan term (many people accidentally “reset” back to 30 years)
Your total interest over the life of the loan
Your risk profile (variable vs fixed, or a split)
Can you refinance with the same lender?
Yes. This is sometimes called repricing or a loan variation. It can be quicker and cheaper, but you may not get the best market deal. It’s still worth comparing alternatives.
When does refinancing make financial sense?
Are you paying a loyalty premium?
Some borrowers end up on a higher rate over time because lenders reserve sharper pricing for new customers. If your loan hasn’t been reviewed in years, you may be paying more than necessary.
A good starting point is a “home loan health check” comparing:
Your current rate and fees
The comparison rate (a more realistic guide than headline rates)
What you actually need (offset, flexibility, extra repayments)
Do the numbers stack up after fees?
Refinancing has costs, and they vary by lender and state. Common costs can include:
Discharge/settlement fees from your current lender
Application fees (some lenders waive these)
Valuation fees (sometimes covered by the lender)
Government charges (where applicable)
Lenders Mortgage Insurance (LMI) if your loan-to-value ratio is above a lender’s threshold
The key is your break-even point: how long it takes for monthly savings to cover switching costs. If you’re likely to move, refinance again, or make a big change before you break even, the benefit may disappear.
Are you refinancing for cash flow, not just price?
A lower repayment can help if budgets are tight, but be careful about stretching the loan term to “feel” comfortable. Reducing repayments by extending the term can increase total interest over time.
If cash flow is the goal, consider options such as:
Refinancing to a lower rate without extending the term
Using an offset account to reduce interest while keeping funds accessible
Making a clear plan for any freed-up cash (e.g., build a buffer, pay down non-deductible debt)
What are the main refinancing risks to watch out for?
Could you be hit with break costs?
If you’re on a fixed rate, exiting early may trigger break costs. These can be material and depend on your loan and market movements. Ask your lender for an estimate before you commit to anything.
Are you tempted by “cash-out” without a plan?
Accessing equity can be useful for renovations or investing, but it also increases your debt. Without a clear purpose, timeframe and repayment plan, cash-out refinancing can set you back years.
If funds will be used for investment, tax outcomes can be complex and depend on your circumstances. Any deductibility is subject to current ATO rules and how the borrowed funds are used.
Are you losing features you rely on?
Some low-rate loans have fewer features. Before switching, check:
Offset account availability and fees
Redraw conditions and processing times
Ability to make extra repayments
Portability (if you plan to move)
Fees for ongoing service or package benefits
Are you resetting the clock on your mortgage?
A common trap is refinancing into a fresh 30-year term. Even with a lower rate, a longer term can mean more interest overall. If you’re already years into your loan, consider keeping the remaining term (or shortening it) if affordable.
Will serviceability rules limit your options?
Even if you’ve been paying your current loan comfortably, a new lender will assess you under their credit criteria. Changes in income, expenses, debts, dependants or employment type can affect approval.
How do you compare refinance offers properly?
What should you look at besides the interest rate?
Use a checklist so you’re comparing like-for-like:
Comparison rate and ongoing fees
Offset and package costs
Estimated total cost over a realistic period (e.g., 2–5 years)
Flexibility: extra repayments, redraw, split options
Customer service and turnaround times (important if you have a tight settlement)
Should you use a broker, go direct, or negotiate?
All three can work.
A broker can compare multiple lenders and manage the process, but not every lender is on every panel.
Going direct can work if you already know what you want and can negotiate.
Negotiating with your current lender can be a quick win, but confirm the new pricing and features in writing.
What’s the typical refinance process in Australia?
Most refinance journeys follow these steps:
Clarify your goal (lower cost, better features, debt restructure, buffer)
Gather documents (income, expenses, liabilities, property details)
Compare options and seek pre-assessment guidance
Apply and complete valuation
Receive approval and review loan documents
Settlement: new lender pays out old loan and security is transferred
Build in time. If you’re refinancing due to a fixed-rate expiry or a looming settlement, start early.
FAQs
1. Does refinancing hurt your credit score in Australia?
Applying for credit usually leaves an enquiry on your credit file. One enquiry is rarely a problem by itself, but multiple applications in a short period can be a red flag to lenders. It’s often better to narrow options first, then apply once.
2. Can I refinance if my property value has dropped?
Possibly, but it may reduce your equity and affect the rate you qualify for or whether LMI applies. Some borrowers choose to stay put and negotiate pricing instead, while they rebuild equity or wait for conditions to improve.
3. Is it worth refinancing for an offset account?
It can be, if you keep savings in the offset consistently and the interest saved outweighs any additional fees. Offset suitability depends on your cash buffer, spending patterns and how disciplined you are with keeping funds parked.
4. Can I refinance to consolidate credit cards and personal loans?
Yes, debt consolidation is a common reason to refinance. The risk is turning short-term debt into long-term debt, which can cost more overall. A payoff plan and spending controls are essential so the debt doesn’t creep back.
5. Should I refinance when my fixed rate is ending?
It’s a good time to review your options. Many loans revert to a higher variable rate after the fixed period. Compare the new variable rate with refinance alternatives, and check for any discharge fees or timing considerations.
Conclusion: make refinancing a decision, not a reaction
Refinancing can be a smart move when it improves your total position, after fees, features, term length and risk are all considered. The best refinance isn’t always the lowest headline rate; it’s the loan structure that supports your goals and keeps you in control of cash flow.
If you’re unsure whether refinancing will genuinely save you money, book a consult with What If Advice. We can help you compare options, stress-test the numbers, and spot the fine print before you switch.
General advice disclaimer: This article provides general information only and does not consider your objectives, financial situation or needs. Consider whether it’s appropriate for you and seek personal advice before acting. Lending and tax outcomes depend on your circumstances and are subject to current lender criteria and ATO rules.