Refinancing your loan
How refinancing works, when it can save you money, the costs to check, and how to work out whether switching is worth it.
The short version
- Refinancing means replacing your loan with a new one, usually to get a better deal.
- Ask your current lender for a lower rate first; it often works.
- Add up switching costs, including break costs on fixed loans and possible LMI.
- Consolidating debts into a home loan can cost more over time.
Refinancing means paying off your current loan with a new one, either with your existing lender or a different one. Done well, it can lower your repayments or help you pay off your debt sooner.
Why people refinance
Common reasons include:
- getting a lower interest rate
- getting features they don’t have, such as an offset account or free extra repayments
- moving from a fixed rate to a variable one, or the other way around
- releasing equity, which means borrowing against the value they’ve built up in their home
- separating, when one person takes over a joint loan
- combining debts, such as a car loan or credit card, into the home loan
Step 1: Ask your current lender first
Many lenders offer their best rates to new customers. Existing customers on older loans can end up paying more.
Before you go anywhere else, call your lender. Tell them the rate you’ve seen elsewhere and ask if they can lower yours. Often they will, and you save money without any paperwork or switching costs.
Step 2: Work out the costs of switching
Switching loans isn’t free. Add up the costs before you decide.
| Cost | What it is |
|---|---|
| Discharge fee | Charged by your current lender to close the loan |
| Break costs | Charged if you leave a fixed-rate loan before the fixed period ends; can be large |
| Application or establishment fee | Charged by the new lender |
| Government fees | Mortgage registration and discharge fees, set by your state or territory |
| Lenders mortgage insurance (LMI) | May apply again if you have less than 20% equity, even if you paid it before |
Exit fees were banned on home loans taken out from 1 July 2011. But discharge fees and break costs on fixed loans can still apply.
Step 3: Check if it’s worth it
A simple way is to compare how much you’d save each month with how much it costs to switch.
Compare comparison rates, not just headline rates. Also check that the new loan has the features you need, and that the fees are not higher.
Step 4: Keep your repayments up
If you get a lower rate, your lender may lower your repayments automatically. Consider keeping them the same as before. The extra goes off your loan, so you pay it off faster and save more interest.
Also check the loan term. If you refinance a loan with 25 years left onto a new 30-year loan, your repayments drop, but you’ll pay interest for five more years.
Combining debts: handle with care
Rolling credit cards or a car loan into your home loan can lower your repayments, because home loan rates are usually lower. But:
- you may pay that debt off over 25 or 30 years instead of a few, so you can pay more interest in total
- your home is now security for that debt
- if you run up the credit cards again, you end up with more debt than before
If you do it, consider closing the old cards and paying extra off the home loan each month.
Where to get free help
Lenders must check you can afford a new loan. If your income has dropped or rates have risen, you may not qualify, even if the new repayments would be lower. If this happens and you’re struggling with repayments, talk to your current lender about financial hardship help. They generally must respond within 21 days.
- National Debt Helpline – free financial counselling on 1800 007 007 or https://ndh.org.au
- AFCA – free complaints on 1800 931 678 or https://www.afca.org.au
- Moneysmart – free mortgage calculators at https://moneysmart.gov.au
Work out your numbers
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Sources and further reading
- Department of the Prime Minister and Cabinet (OIA) – Post-implementation review: ban on mortgage exit fees
- Commonwealth Bank – Comparison rate warning (standard home loan comparison basis)
- ASIC – FAQs: dealing with consumers and credit (hardship notices)
- ASIC – Tips for tackling debt
- Australian Financial Complaints Authority
General information only. This video doesn't take into account your objectives, financial situation or needs. Figures are for 2026–27 and can change. Check the official sources above.