Refinancing your home loan could unlock thousands of dollars in savings and give you access to better features that weren’t available when you first secured your mortgage.

With the Reserve Bank of Australia’s (RBA) interest rate cut from 4.35% in December 2024 to 4.10% in February 2025,  almost half of Australian mortgage holders surveyed said they’re considering refinancing, according to a Mozo survey reported by SBS News. The rate was lowered again to 3.85% in May, with further cuts to 3.6% expected later this year, as recently reported by The Guardian (7 July 2025).

So, what does this mean? Lower rates can reduce monthly repayments and create opportunities to refinance on better terms. But with great opportunity comes great responsibility. To know whether refinancing is right for you, it’s important to weigh the costs, benefits, and market conditions.

What Is Refinancing and How Does It Work?

Refinancing is the process of replacing your current home loan with a new one, either with your existing lender or a different one. Homeowners usually refinance to get a better interest rate, more flexible features, or improved loan terms.

It works by using the new loan to pay out the old one, essentially starting fresh. This can be a smart move if market conditions have changed, your credit score has improved, or better loan options are now available.

Just keep in mind: refinancing isn’t just switching lenders. It’s setting up a brand new loan with fresh terms, interest rates, repayment options, and features. These may include an offset account, which reduces the interest you pay by linking your savings to your loan, or a redraw facility, which lets you access any extra repayments you’ve made when needed.

Why Australian Homeowners Choose to Refinance

The decision to pursue refinancing of an existing housing loan typically stems from several compelling reasons:

• Lower interest rates: Even a modest rate drop can lead to substantial savings over the life of your loan, potentially cutting thousands from your annual repayments.
• Access built-up equity: Many homeowners refinance to tap into property equity they’ve accumulated, using these funds for renovations, investment opportunities, or debt consolidation
• Switch rate types: Borrowers often move from variable to fixed rates for certainty, or from fixed to variable rates to take advantage of market conditions and potential savings.
• Changed financial circumstances: Increased income may allow higher repayments to reduce loan terms, while financial pressures might require lower repayments to maintain stability.
• Better loan features: Modern loans offer attractive features like offset accounts, redraw facilities, and professional packages that weren’t available when you first borrowed.

Let’s Illustrate

Let’s say you have $400,000 on your current mortgage at 5.5% interest, paying $2,271 monthly. Now, you’ve found a new lender offering 4.2% interest.

What happens:

• New lender approves a $400,000 loan at 4.2%
• New lender pays off the old $400,000 loan completely
• You now have the same debt but at 4.2% instead of 5.5%
• Monthly payments drop to $1,956 – saving $315 per month

The result? Same house, same debt amount, but $3,781 less per year in repayments. That’s refinancing – swapping an expensive loan for a cheaper one.

Exploring Your Options

Today’s market offers diverse home loan refinancing options to suit different financial situations and goals:

• Principal-and-interest loans: Traditional repayment structure that reduces both loan balance and interest over time, building equity steadily whilst providing predictable repayment schedules.
• Interest-only loans: Popular with investors seeking tax advantages and improved cash flow, these loans allow borrowers to pay only interest charges for a specified period.
• Fixed-rate loans: Provide certainty and protection against rising interest rates, offering peace of mind with locked-in repayments for the fixed term period.
• Variable-rate loans: Offer flexibility and potential savings when rates fall, with repayments that adjust according to market conditions and Reserve Bank decisions.
• Split loans: Combine both approaches, allowing you to fix a portion of your debt while maintaining variable rates on the remainder for balanced risk management. Exploring this? Use our FREE split loan calculator now!

Furthermore, modern refinancing often comes with handy features like:

• Offset accounts: Link your savings to your loan to pay less interest.
• Redraw facilities: Access extra repayments you’ve already made.
• Professional packages: Get bundled financial products with fee discounts.

Understanding Home Loan Refinancing Costs

Before refinancing, be sure to factor in the costs as these can affect your overall savings and influence whether it’s the right move.

Fee Type	Estimated Cost	Details
Discharge Fees	$150 – $500	Charged by your current lender to release your existing mortgage.
Application Fees	$0 – $600+	Varies by lender and loan product for new loan applications.
Legal Fees	$300 – $800	Covers solicitor or conveyancer services for preparing loan documents.
Valuation Fees	$200 – $500	For a current property valuation required by the new lender.
Registration Fees	$100 – $200	To register the new mortgage with your state’s land titles office.
Ongoing Fees	Varies (e.g., $0 – $400+/year)	Annual or monthly fees charged by some lenders over the loan term.

Comparing Rates

Home loan refinancing rates vary significantly between lenders and loan products, making comparison essential for maximising your savings. Major banks traditionally offer stability and comprehensive services, but their rates often aren’t the most competitive in the market.

In contrast, smaller banks and credit unions frequently provide more attractive rates and personalised service, whilst online lenders can offer some of the lowest rates available due to their reduced overhead costs. However, these competitive rates sometimes come with fewer features or limited customer support.

When comparing, look at both the interest rate and the comparison rate, which factors in most associated fees and charges. The comparison rate provides a more accurate picture of the total cost of borrowing and makes it easier to compare different loan products fairly.

It might feel overwhelming, but our expert Toowoomba Mortgage Brokers are here to walk you through every option and help you find the solution that fits you best.

The Refinancing Process: Step by Step

The refinancing process typically involves several key stages that require careful attention and preparation:

• Research and comparison phase: Begin by researching and comparing different lenders and loan products, focusing on interest rates, fees, and features that match your financial goals.
• Application submission: Submit a formal application along with supporting documentation, including recent payslips, tax returns, bank statements, and details about your existing loan and property.
• Assessment and valuation: The lender will review your application, which usually includes a property valuation and a check of your financial details to determine eligibility.
• Loan offer review: If approved, you’ll receive a formal loan offer outlining the terms and conditions of your new loan, which you should review carefully before acceptance.
• Settlement coordination: After accepting the offer, your new lender will coordinate the settlement process, paying out your existing loan and registering the new mortgage.

This process generally takes four to six weeks from application to settlement, though exact timing can vary based on the lender and how quickly documents are provided.

When Refinancing Might Not Be Right

If you’re planning to sell your property within the next two years, the costs associated with refinancing might outweigh the benefits.

Similarly, if you’ve already paid off a significant portion of your existing home loan, the savings from refinancing might be minimal. Break costs for fixed-rate loans can also be substantial, particularly if you’re refinancing during a period of rising interest rates.

Your credit score and financial situation are also important factors. If your circumstances have deteriorated since you first obtained your loan, you might not qualify for better rates or terms.

Getting the Most from Refinancing

To get the best results, time your application well. Market trends, your financial situation, and lender offers all affect the deal you’ll get.

Also, keep your credit score strong by paying bills on time and limiting new credit applications. If you’re planning renovations or need extra funds, consider bundling them into your refinancing; it’s often cheaper than separate loans.

Common Mistakes to Avoid

Many homeowners make costly errors during the refinancing process that can diminish potential benefits:

• Focusing solely on interest rates: Loans with the lowest rates sometimes include higher fees or fewer features, making them less attractive overall when you consider the complete package.
• Underestimating time requirements: Failing to provide documentation promptly or not responding to lender queries quickly can delay settlement and potentially affect your rate lock.
• Frequent refinancing: Some borrowers refinance repeatedly, chasing minor rate improvements, but each refinancing incurs costs that can result in higher overall expenses despite marginally better rates.
• Ignoring break costs: Fixed-rate loan holders might face substantial break costs, especially when refinancing during periods of rising interest rates.
• Not reading the fine print – Loan terms and conditions contain important details about fees, penalties, and features that can significantly impact your financial outcomes.

Before deciding on refinancing, assess your current loan’s performance to make informed decisions about potential improvements Check your loan health today, FREE!

Guiding You Through Refinancing

Refinancing your home loan can deliver substantial financial benefits, but success depends on careful planning, thorough research, and professional guidance. By understanding the costs, comparing your options systematically, and timing your application strategically, you can maximise your savings and improve your financial position.

At Unlocked Finance, our Toowoomba brokers are experienced in helping homeowners like you navigate the refinancing process with confidence, wherever you are in Australia. We’ll assess your unique situation, compare loan products from multiple lenders, and guide you through every step of the process to ensure you secure the best possible outcome.

Find out if refinancing could save you money. Book a FREE consultation today.