Refinancing your home loan is one of the most impactful financial decisions you can make as a homeowner. Get it right and you could save tens of thousands of dollars over the remaining life of your loan. Get it wrong — or refinance for the wrong reasons — and you could end up paying more.
This guide helps you think through the decision clearly, with real numbers.
What Is Refinancing?
Refinancing means replacing your existing home loan with a new one — either with your current lender (called an "internal refinance" or "variation") or with a different lender entirely (a full refinance).
When most people say "refinance," they mean switching to a new lender. This is also called "loan switching" and typically involves:
- Discharging your existing loan (closing it)
- Taking out a new loan with a new lender
- The new lender pays out the old lender
- You continue repayments to the new lender
The Main Reasons Australians Refinance
1. Lower interest rate: The most common reason. If rates have dropped, or you've moved to a better credit position, a lower rate saves money every month.
2. Access to home equity: "Cash-out" refinancing lets you borrow against the equity in your home to fund renovations, investments, or other purchases.
3. Better loan features: An offset account, redraw facility, or ability to make extra repayments without penalties can be as valuable as a rate reduction.
4. Consolidating debts: Rolling high-interest debts (credit cards, personal loans) into your home loan at a lower rate — though this requires careful consideration.
5. Changing loan structure: Switching from variable to fixed, or principal and interest to interest-only (for investors).
6. Removing LMI: If your property has grown in value and your loan balance has fallen, you may now have 20%+ equity, allowing you to refinance to a standard (non-LMI) product.
Running the Numbers: Is Refinancing Worth It?
The key question is whether the savings from a lower rate outweigh the costs of switching.
Costs of refinancing:
- Discharge fee from current lender: $150–$500
- New loan establishment fee: $0–$500
- Property valuation (new lender): $0–$600 (often waived)
- Government mortgage registration fees: $150–$350 (varies by state)
- Break costs (if on a fixed rate): Can be thousands — always check before breaking a fixed loan
- LMI (if new LVR is above 80% and you're not exempt): Can be significant
Total switching cost estimate (variable rate, standard property): $500–$2,000
Now run the saving calculation:
Example: $650,000 loan, 25 years remaining
- Current rate: 6.85% | Monthly repayment: $4,630
- New rate: 5.99% | Monthly repayment: $4,238
- Monthly saving: $392
- Annual saving: $4,704
- Switching cost: $1,200
Breakeven point: 3 months (you've recovered the switching cost) 5-year saving: $23,520 – $1,200 = $22,320 net 25-year saving: $117,600 – $1,200 = $116,400 net
In this scenario, refinancing is emphatically worthwhile.
The "Loyalty Tax": Why You're Probably Being Overcharged
Australian banks have historically given their best rates to new customers, not existing ones. This "loyalty tax" means long-term customers are often paying 0.30%–0.80% more than a new customer of the same lender would pay.
In 2026, this dynamic continues. If you took out your loan more than 2 years ago and haven't renegotiated, there's a very good chance you're paying more than the current market rate.
A quick test: go to the lender comparison pages of finder.com.au or canstar.com.au and check whether your current rate is competitive. If your rate is more than 0.30% above the best comparable product, refinancing is worth investigating seriously.
When Refinancing Might NOT Be Worth It
You're on a fixed rate with significant break costs: Breaking a fixed rate loan before the term ends can cost thousands in "break costs" (calculated based on how much rates have moved since you fixed). Always get a break cost estimate before proceeding.
You're close to paying off the loan: If you have less than 5 years remaining, the savings won't be large enough to justify the cost and admin. Focus instead on making extra repayments.
Your property value has dropped significantly: If your property has dropped in value and your LVR is above 80%, you may face LMI or lender reluctance. Get an upfront valuation estimate before applying.
You just bought (last 6–12 months): Most lenders won't refinance a loan that's less than 6 months old. Some have 12-month minimums.
Your financial situation has changed negatively: If your income has dropped, you've taken on more debt, or your credit score has deteriorated since your original loan, refinancing to a better rate may be difficult.
The Refinancing Process with NIK Finance
- We assess your current loan — rate, features, remaining balance, break costs
- We compare the market — 40+ lenders, finding the best rate for your LVR and profile
- We run the net savings calculation — ensuring refinancing genuinely makes sense
- We prepare your application — collecting documentation, submitting to the lender
- The new lender values your property — desktop or physical valuation
- Formal approval — usually 5–10 business days
- Settlement — new lender pays out old lender; you receive a new loan contract
- Ongoing — we check in annually to ensure you're still competitive
The whole process typically takes 4–8 weeks from decision to settlement.
How Often Should You Review Your Home Loan?
The standard recommendation is to review your home loan every 2 years. Mortgage markets change, competition increases, and your own financial position evolves — all of which can create refinancing opportunities.
At NIK Finance, we proactively monitor our clients' loan rates and alert them when we identify a meaningful saving opportunity. You shouldn't have to track this yourself.
Frequently Asked Questions
Does refinancing affect my credit score? Yes — a refinance application involves a hard credit enquiry, which temporarily reduces your score by a small amount. One inquiry is fine. Don't apply to multiple lenders — use a broker.
How long does refinancing take in 2026? Most refinances complete in 4–8 weeks. Non-bank lenders often settle faster (2–4 weeks). Your conveyancer coordinates the discharge and registration process.
Can I refinance if my property value has fallen? If the LVR is above 80%, you'll likely face LMI or limited lender options. A broker can identify lenders who are more accommodating at higher LVRs.
Can I refinance while on parental leave? Yes, though lenders require evidence of your return-to-work income. Your employment contract confirming your return and salary is typically sufficient.
Do I need a solicitor to refinance? Not always — many lenders have in-house solicitors who handle the discharge and registration. Your broker will advise whether you need independent legal support.
Find Out If Refinancing Saves You Money
It takes 2 minutes to find out. Fill out our form at nik.finance and we'll run a full comparison showing exactly how much you could save by refinancing your home loan today.
NIK Finance holds an Australian Credit Licence. All recommendations are subject to individual assessment. Break costs should be confirmed with your current lender.