Refinancing — switching your home loan to a new lender or product — can save Australian borrowers thousands of dollars per year. But it's not always the right move, and doing it at the wrong time can cost you money. Here's how to tell when it makes sense.
Australian banks routinely offer their best rates to new customers while existing customers quietly pay more. This is sometimes called the "loyalty tax." If your loan is more than 2–3 years old and you haven't reviewed your rate, there's a good chance you're paying 0.3–0.8% more than you need to.
On a $600,000 loan, 0.5% extra costs you $3,000 per year — or $90,000 over 30 years. That's a significant penalty for doing nothing. The lender isn't going to call you and offer a better deal — you have to ask for it, or leave.
📞 Quick check: Call your lender and ask what their best current rate is for existing customers. If it's more than 0.2% above what you see advertised for new customers, it's time to have a conversation — or talk to a broker.
The basic formula is:
Monthly saving = (current rate − new rate) × loan balance ÷ 12
Then divide your refinancing costs by the monthly saving to find your break-even point — the number of months before you start actually saving money. If you plan to stay in the property longer than the break-even, refinancing makes sense.
For example: if refinancing costs $1,200 and saves you $300/month, you break even in 4 months. Very much worth it. If it costs $2,000 and saves you $80/month, your break-even is 25 months — still worthwhile if you're not moving soon.
| Loan Balance | Rate Drop | Monthly Saving | Annual Saving |
|---|---|---|---|
| $400,000 | 0.30% | $100 | $1,200 |
| $600,000 | 0.30% | $150 | $1,800 |
| $600,000 | 0.50% | $250 | $3,000 |
| $800,000 | 0.50% | $333 | $4,000 |
| $1,000,000 | 0.50% | $417 | $5,000 |
Approximate figures for illustration only. Actual savings depend on loan term and remaining balance.
Many borrowers put off refinancing because they assume it's complicated. In practice, the process is fairly straightforward — especially with a broker managing it:
The general rule of thumb is to review your home loan every 2–3 years, or whenever:
A good mortgage broker will proactively flag when it's worth reviewing — this is part of the ongoing value they provide.
Typically 3–6 weeks from application to settlement, though some lenders are faster. The main time-consuming steps are the property valuation and the lender's credit assessment. A broker who knows which lenders have fast turnaround times can significantly speed this up.
The application will create a credit enquiry, which has a minor temporary impact. However, if you're approved and your repayments become more manageable, the long-term effect on your credit profile is neutral to positive. The risk is being declined — which is why using a broker to select the right lender first is important.
It's possible but harder. If your LVR is above 80% because values have dropped, you may be required to pay LMI on the refinance, which can offset the savings. Some lenders will refinance up to 90% LVR without LMI if you meet certain criteria. A broker can advise based on your specific numbers.
A rate negotiation means calling your existing lender and asking them to match a competitor's rate. Some lenders will, and it's always worth trying — it's fast and costs nothing. But lenders typically only offer modest discounts to retain customers. Refinancing to a new lender often achieves a larger rate reduction. The ideal approach is to use a competitor offer as leverage in negotiation first, then refinance if they won't match it.
Use our free refinancing calculator to model your potential savings — then talk to a broker who can find the actual rate you'd be offered across 40+ lenders.