Refinancing means replacing your current home loan with a new one, either with a different lender or, sometimes, with a new product at the same lender. The usual reason is a lower interest rate, a more useful offset account, or a change from a fixed to a variable rate, or the other way around. A lower advertised rate is not, by itself, a reason to switch. The new loan is a fresh credit assessment, there are costs to leave the old loan, and stretching the term can erase the monthly saving.
ASIC's Moneysmart "Switching home loans" page, last updated on 3 November 2026, is the official consumer guide this article follows. Moneysmart also publishes a mortgage switching calculator you can use alongside the Never Lose Interest mortgage repayment calculator, offset versus extra repayments and buying versus renting explainers.
This is general information only. It is not a loan offer, a credit assessment or personal advice.
Should I refinance or ask my current lender first?
Ask your current lender what it will do before you apply elsewhere. Lenders can often reduce a variable rate for an existing customer, especially if you have a strong repayment history and at least 20% equity. That conversation costs less than a full refinance, and it may be enough.
Moneysmart notes that variable rates can differ by more than 2%, so shopping around can still be worth the paperwork. Comparison websites are businesses. They may not list every lender, and some are paid for referrals. Use them as a starting point, then confirm the rate, fees and features directly with the lender.
A refinance is a new loan. The lender will reassess your income, expenses, debts and the property, and it will apply a serviceability buffer on top of the advertised rate. APRA requires authorised deposit-taking institutions to assess new loans with a buffer of at least 3 percentage points above the loan's interest rate. Passing that test last time does not guarantee you will pass it now, particularly if your income, living costs or other debts have changed.
What does refinancing cost?
Typical costs include:
- a discharge or termination fee to close the old loan
- an application or establishment fee on the new loan
- an internal switching fee, if you stay with the same lender
- valuation, legal and settlement costs
- a break cost if you leave a fixed-rate loan early
Break costs on a fixed loan can be large, especially if market rates have fallen since you fixed. Ask your current lender for a figure before you decide. Variable loans do not usually have a break cost of that kind, but they can still have discharge fees.
Moneysmart also says you may be liable for stamp duty when you refinance, and to check with your lender. Transfer duty usually applies when ownership of the property changes, which a straightforward refinance of the same borrowers on the same title often does not involve. Some states still charge mortgage registration, discharge or other fees, and the rules are not identical everywhere. Confirm the position with the revenue office in your state or territory, and with your lender, rather than assuming duty is nil or that a particular fee applies.
If you have less than 20% equity in the property, the new lender may require lenders mortgage insurance (LMI) again. Ask whether any unused portion of LMI on the old loan can be refunded, and include any new LMI in the comparison. Building a larger deposit, or waiting until equity is above 20%, can avoid that cost. The borrowing power calculator explainer covers how lenders look at income, debts and buffers.
Do not automatically extend the loan term when you refinance. A lower rate on a freshly reset 30-year term can reduce the monthly payment while increasing the total interest you pay. If the goal is to cut interest, keep the remaining term the same, or shorter, unless you have a specific reason to stretch it.
How do I work out whether switching is worth it?
Compare the total cost of staying with the total cost of switching, not just this month's repayment.
- Confirm your current interest rate, remaining term, balance, fees and features, including any offset or redraw.
- Get a comparable quote from the new lender, including all fees, the comparison rate, LMI if it applies, and the proposed term.
- Add the one-off switching costs.
- Work out the new repayment on the same remaining term, using the mortgage repayment calculator.
- Divide the switching costs by the monthly saving to see how many months it takes to recover those costs.
- If you will not keep the loan that long, the switch may not pay for itself.
Moneysmart's official Simon and Tiana example shows the arithmetic. They had 25 years left on their loan. Switching cut their repayments by $280 a month and saved $84,040 in interest over the remaining term. The switching costs were recovered in five months. Your figures will be different. Use that structure, with your own rate, balance, term and fees, rather than relying on their dollar amounts.
Rate movements cut both ways. The Reserve Bank cash rate rose five times in 2026, in February, March, May, September and November, as noted on Moneysmart's switching page as at 3 November 2026. A refinance that looks attractive today can look different after the next move, and a fixed rate that seemed expensive can become a break-cost problem if you want to leave early. This article is not a forecast of future rates.
What else should I check before I switch?
Features can matter as much as the rate:
- whether a genuine offset account is available, and whether your salary can be paid into it
- extra repayment rules, and whether a redraw is limited
- package fees, if the lower rate depends on a package
- whether you can split the loan between fixed and variable
- portability, if you might sell and buy again
- how the new loan treats an investment property, if that is what you are refinancing
After settlement, re-link any offset or redraw the way you intended. ASIC has warned about accounts that are not properly offset against the loan. A lower rate with an unused offset can be worse than a slightly higher rate with a working offset.
If the property is an investment, refinancing does not by itself change the tax treatment of interest, but a change in the loan's purpose or a further advance used for private spending can. Keep records of what the new funds are used for. The negative gearing guide covers interest deductibility in outline.
If you are close to selling, or you plan to pay the loan out in a year or two, the switching costs may not be recovered. In that case, a temporary rate reduction from your current lender, or simply extra repayments, can be the cheaper path.
Frequently asked questions
Is refinancing the same as a loan variation?
Not always. Some lenders can change your rate or product without a full discharge and a new loan. That can be cheaper. A move to a new lender is a refinance and a new credit assessment.
Will I have to pay stamp duty again?
Transfer duty usually follows a change of ownership, not a change of lender on the same title. Moneysmart still flags that you may be liable for stamp duty when you refinance, and tells you to check with your lender. Confirm any mortgage registration, discharge or duty cost with the revenue office and the lender. The stamp duty explainer covers purchase duty, which is a different event.
Can I refinance if I have less than 20% equity?
Some lenders will consider it, often with LMI. That insurance is a real cost and should be included in the comparison. A refinance that adds LMI can cancel out a modest rate cut.
Does refinancing reset my loan term?
Only if you agree to a new term. You can usually ask for the same remaining term, or a shorter one. Resetting to 30 years will usually lower the monthly payment and raise the total interest.
Should I fix my rate when I refinance?
That depends on whether you value repayment certainty more than flexibility, and on the break cost if you later need to leave the fixed period. This page does not recommend fixing or staying variable.
General information warning
This article is general information only. It is not a loan offer, a credit assessment or personal advice, and it does not take into account your objectives, financial situation or needs. Interest rates, fees and credit policy change. Consider speaking with your lender and, if you need personal advice, with a licensed adviser, and use the official Moneysmart switching calculator as well as any Never Lose Interest tools, before you apply.
Sources
- Moneysmart, Switching home loans, last updated 3 November 2026, including the official Simon and Tiana example and the note that the cash rate increased five times in 2026 as at that date.
- Moneysmart, Mortgage switching calculator.
- Moneysmart, Interest rates and fees and related home loan guidance.
- Australian Prudential Regulation Authority, serviceability buffer guidance for authorised deposit-taking institutions, currently a minimum buffer of 3 percentage points.
Last reviewed: November 2026.