In short: Refinancing means replacing your current home loan with a new one, either by getting a better deal from your current lender or by switching to another. On a $600,000 loan, a rate 0.5% lower saves roughly $3,000 a year in interest, so it is worth checking your rate every year or two. Just weigh that against switching costs such as discharge fees, government registration fees and, on a fixed loan, break costs.

Refinancing is a valuable and necessary part of mortgage ownership.

When you've had a home loan for a few years, your life will undergo many changes during that time. Whether you’ve got a promotion, changed careers or started a family, your financial circumstances evolve as you do.

Refinancing allows you to adapt to these changes and get a home loan that works for your current needs and goals. Equally important, refinancing helps borrowers avoid paying a ‘loyalty tax’ to their current lender and ensures they are still getting the best rate and deal on their mortgage.

Sadly, many borrowers are unaware of the benefits of refinancing and don’t want the hassle of renegotiating their home loan. But this process doesn’t have to be complicated.

Here is how refinancing works, what it costs, and when it is worth doing.

What is refinancing?

Refinancing is the process of replacing an existing home loan with a new home loan that is more beneficial to the borrower’s interests. This can mean either negotiating a better rate and terms with the current lender or switching lenders for a better offer elsewhere.

Why would a borrower want to refinance?

The main reason borrowers refinance is to get a lower interest rate than their existing loan.

Lenders will often gradually raise the interest rate on a home loan over time whilst offering better rates to new customers. This is called the ‘loyalty tax’, which borrowers can avoid by refinancing, either through negotiating a lower rate with their existing lender or switching to a new one. Refinancing to a better rate can noticeably cut your repayments. Here’s what most people miss: a quick call to your current lender asking for a rate review is a form of refinancing too, and it costs nothing.

Another reason borrowers refinance is debt consolidation. This involves combining several debts, such as personal loans obtained from multiple lenders, into a single home loan. When this route is taken, the borrower has one total debt to one lender, typically with a more advantageous interest rate and loan repayment period.

Conversely, refinancing can also be used to access equity inside the mortgage to finance a purchase or expense.

Refinancing also allows borrowers to switch between variable and fixed rates, depending on their current financial needs and circumstances. It’s also often used to shorten or extend the length of the repayment period to help borrowers pay off their loan faster or reduce their monthly repayments.

Why would a borrower not want to refinance?

One of the biggest reasons borrowers avoid refinancing is that it can be complex and time-consuming. Lenders know this, which is one reason older loans often sit on higher rates than the ones offered to new customers. Fortunately, the refinancing process is often easier than it appears, especially if you enlist a mortgage broker to help with the process.

Borrowers who consolidate their debt or extend the length of their home loan should be mindful of the additional interest costs that may accrue on their home loan over time.

Check the switching costs upfront: a discharge fee from your current lender, government fees to register the new mortgage and discharge the old one, any application or valuation fee from the new lender and, if you are on a fixed rate, break costs. If your new loan is more than 80% of the property’s value, you may also have to pay lenders mortgage insurance (LMI) again.

A new lender will also assess you as if you were a new borrower. Under APRA’s rules, lenders test whether you could still afford the repayments if the rate were at least 3 percentage points higher. If your income has dropped or your debts have grown, you may not qualify for a new loan even if you have never missed a repayment.

What else should I consider before refinancing?

There are several important considerations you should make before refinancing.

The first is to assess your current needs and goals and determine what type of home loan would best help you achieve these. Apply this to your existing mortgage and research other rates and deals available on the market.

It’s also important to review your spending and savings strategy every couple of years to maintain your ability to make loan repayments.

You also need to consider how your overall financial circumstances will be impacted by refinancing; whether that would mean changes to your budget, savings or loan repayment term.

Lastly, you should consult a mortgage broker before refinancing to help you locate and negotiate the best new loan terms for your mortgage.

What information do you need to provide to refinance?

The type of information required may vary depending on the lender. In general, you will need to provide the following when:

• Valid identity such as a driver's license, Medicare card, or passport.

• Details of your employment, income, assets, and liabilities. Here, you will need payslips and bank statements.

• Your consent for the lender to check your credit file (they obtain this themselves)

• Information regarding your existing loan, such as your repayment history and loan balance.

• Details of the property. The new lender will usually order its own valuation.

It is a sound financial practice to review your current mortgage and consider refinancing every couple of years. It keeps your rate competitive and makes sure your loan still suits where your life is now.

If you’d like a second pair of eyes on your loan, book a chat with Gav. Brokers are usually paid by the lender, so the review typically costs you nothing.

Lastly, if you're wondering how much refinancing may cost or save you on your home loan, check out our free refinancing calculator tool.

Frequently asked questions

How often should I review my home loan?

Every year or two, and whenever your circumstances change. A rate review with your current lender is free and often gets results on its own.

What does it cost to refinance?

Typically a discharge fee from your old lender, government registration fees, any new lender fees and, on a fixed rate, break costs. LMI can apply again if you borrow more than 80% of the property’s value.

Can I refinance if my income has dropped?

Possibly not. The new lender assesses you from scratch, including a buffer of at least 3% above the loan rate, so a drop in income or new debts can limit your options.

Last updated: 2 November 2026.

General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.