Refinancing Guide
When and how to refinance your mortgage for maximum savings
In this guide
Quick Fact
The average Australian refinances their home loan every 4-5 years. With rates changing frequently, many homeowners could save thousands by refinancing at the right time.
When to Refinance
Key Triggers for Refinancing
Interest rates have dropped
If your current rate is 0.5% or more above market rates
Fixed rate period ending
Perfect time to reassess and negotiate
Improved financial position
Better income or credit score can unlock better rates
Home value increased
Lower LVR can qualify you for better rates
Need to access equity
For renovations, investments, or debt consolidation
The 2% Rule
Generally, refinancing makes sense if you can reduce your rate by at least 0.5% and you plan to stay in the home for at least 2 more years to recoup the costs.
Benefits of Refinancing
Financial Benefits
- • Lower interest rate
- • Reduced monthly repayments
- • Access to equity
- • Debt consolidation
- • Cashback offers
Feature Benefits
- • Better loan features
- • Offset account access
- • Redraw facility
- • More flexible terms
- • Remove mortgage insurance
Real Savings Example
Current loan: $400,000 at 6.5% = $2,528/month
New loan: $400,000 at 5.5% = $2,271/month
Monthly savings: $257 | Annual savings: $3,084
Costs to Consider
Exit Costs from Current Lender
- Discharge fee: $150-400
- Break costs (fixed loans): Can be thousands
- Deferred establishment fee: If within first few years
New Lender Costs
- Application fee: $0-600 (often waived)
- Valuation fee: $0-300
- Settlement fee: $150-400
- Lenders Mortgage Insurance: If LVR > 80%
Government Charges
- Mortgage registration: $100-200
- Transfer fee: Varies by state
- Stamp duty on mortgage: Some states only
Cost-Saving Tips
- • Negotiate fee waivers with new lender
- • Look for refinance cashback offers
- • Time refinance when fixed period ends
- • Compare total costs, not just rates
The Refinancing Process
Research & Compare
Compare rates, fees, and features across multiple lenders. Use comparison tools and speak with brokers.
Timeline: 1-2 weeks
Get Pre-Approval
Submit application with chosen lender. They'll assess your eligibility and provide conditional approval.
Timeline: 2-5 days
Property Valuation
New lender arranges property valuation to confirm current market value.
Timeline: 3-7 days
Formal Approval
Lender completes final checks and issues formal approval letter.
Timeline: 1-3 days
Settlement
Legal transfer of loan from old to new lender. You start making repayments to new lender.
Timeline: 2-4 weeks
Total timeline: Allow 4-6 weeks from application to settlement. Start the process 2-3 months before fixed rate expires to avoid reverting to variable rate.
Documents Required
Income Documents
- Recent payslips (2-3 months)
- Employment contract
- Tax returns (2 years)
- Bank statements (3-6 months)
- Rental income evidence
Property & Loan Documents
- Current loan statements
- Council rates notice
- Insurance policies
- Identification (license, passport)
- Asset and liability statement
Pro Tip
Create a refinancing folder with all documents scanned and ready. This speeds up the application process significantly.
Common Mistakes to Avoid
1. Focusing only on interest rate
Consider fees, features, and total cost over the loan term.
2. Not negotiating with current lender first
Your current lender may match or beat competitor offers to keep you.
3. Ignoring break costs on fixed loans
Calculate break costs before deciding - they can eliminate savings.
4. Applying with multiple lenders simultaneously
Multiple credit checks can hurt your credit score.
5. Not reading the fine print
Understand all terms, conditions, and potential fees.
Calculate Your Savings
Quick Refinance Calculator
Use this formula to estimate potential savings:
Monthly Savings = Current Payment - New Payment
Break-even Point = Total Refinancing Costs ÷ Monthly Savings
Example Calculation:
- Current payment: $2,500/month
- New payment: $2,200/month
- Monthly savings: $300
- Refinancing costs: $2,000
- Break-even: 7 months
Rule of thumb: If you'll stay in the property longer than the break-even point, refinancing likely makes financial sense.
Find Your Perfect Mortgage in Minutes
Our RateReviewGuide Assistant analyzes your financial situation and instantly matches you with the best home loan options from Australia's top lenders.
No commitment required • Free to use • Results in seconds
Key Takeaways
- • Refinance when you can save at least 0.5% on your rate
- • Always negotiate with your current lender first
- • Calculate total costs, not just interest savings
- • Allow 4-6 weeks for the complete process
- • Consider using a broker to access more options
Disclaimer: This guide provides general information only. Refinancing decisions should be based on your individual circumstances. Consider seeking professional financial advice before refinancing.
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