How Home Loan Refinancing Works in Australia

Most people who ask me about refinancing want a lower rate or money out of the house for something specific. If it's the rate, start by asking your bank for its best offer. If you need extra funds or different features, we'll check whether your current loan can do that too.

Refinancing replaces your mortgage with a new loan. It pays out the existing balance, then you make repayments under the new terms. You keep your home; the rate, lender and features can change.

If you're already a Hunter Galloway client, we review your loan every 12 months. Sometimes a rate adjustment with the current bank is enough. The savings or useful features need to justify the cost of refinancing.

You can replace the balance you owe, ask for extra borrowing against your equity, or change the features and term. Tell me which problem you're trying to solve so we compare the right loans.

A fixed rate gives you a set rate for an agreed period. A variable loan usually gives you more room for extra repayments and an offset, though its rate can rise or fall. You can split the balance between both. We'll check the cost and rules for the features you'd use.

Changing lenders means a new loan application. The lender checks your current income, expenses, debts, credit history and property value, even if you have made every repayment on the old loan.

If an offset account is the reason for changing, check its fee and how much you'd usually keep in it. If you're moving other debts into the mortgage, read our debt consolidation guide and plan how quickly you'll repay that portion.

Start with your latest loan statement and income records. If you're self-employed, we'll work out which records the lender needs before sending you away to collect a pile of documents. Our self-employed home loan guide explains the main income options.

For variable pay or a change in employment, see the unusual employment and income guide.

The bank checks the income left after tax, living costs and other debts. Credit card limits count even when there's nothing owing. It also allows for higher mortgage repayments, generally testing at least 3 percentage points above your loan rate.

APRA allows banks to make limited exceptions, including for eligible refinances. A good repayment history may help that discussion, but it doesn't give you an automatic exemption. If your income has fallen, I'd check which options fit before lodging an application.

You can check your credit reports for errors before applying. MoneySmart lists Experian and Equifax as Australia’s 2 main credit reporting bodies, with a free report available every 3 months. See how to get your credit reports.

If missed payments or defaults are on your file, read refinancing with bad credit before you apply.

Allow a few weeks for the application, valuation, loan documents and payout. Missing income records, questions about variable pay or a valuation that needs an inspection can add time. If a fixed period is ending or you need renovation funds by a date, tell us at the start.

After approval, your old bank must process the discharge, and both lenders need to be ready for settlement. A faster-settlement service can shorten that handover for eligible loans, but it doesn't replace the new lender's assessment.

Ask us for a current timing estimate before you commit to a date. We'll check the application and discharge timeframes together.

The payout can include interest up to settlement and closing costs, so it can be higher than the balance on your last statement. We'll compare the payout figure with the approved loan before booking the switch.

If there's a gap, you'd need to cover it with available cash or have the lender approve a different amount or structure. If neither works, the refinance can't settle as planned. Keep making payments on the existing loan until the payout is complete.

At settlement, the new bank pays out the old loan for you. The old bank then releases its mortgage over your home and the new one is registered. You don't need to withdraw and transfer the loan money yourself.

The discharge request starts that handover with the old bank. Keep making your usual repayments until the old loan has been paid out.

Don't send the discharge request before the new loan is approved and the settlement plan is clear. If you're borrowing extra, set up each purpose (renovation, debt, investment) as its own split.

Your salary and direct debits do not move just because the mortgage does. Make a list of the payments coming into and out of the old account, then confirm when the new accounts are ready.

Keep enough money available for bills during the changeover. After settlement, check the old loan has closed, the new offsets are linked to the right loan splits and the first repayment date is correct. Close old transaction accounts only once the remaining payments have moved.

I want the full switching cost before calling a lower rate a saving. A break cost or a new LMI premium can use up the saving. These are the costs I'd check:

Read more about fixed rate break costs before ending a fixed loan. A comparison rate is useful because it includes the interest rate and most fees, but it uses a standard loan example and does not include every possible cost.

Divide the upfront switching cost by the monthly saving after ongoing fees, comparing the same balance and remaining term. That gives you a simple break-even point.

If you plan to sell before you've recovered the switching costs, changing loans may leave you worse off.

Compare the repayments and time to recover your costs in our refinance home loan guide or the independent Moneysmart mortgage switching calculator.

Include any cashback in the calculation, along with when it arrives and whether you might have to repay it. Then compare the rate and fees over the period you'll keep the loan.

An introductory rate needs the same treatment. Check its end date and the rate that follows.

Take a $500k loan with 25 years left. Cutting the rate helps, but restarting at 30 years changes the result again:

These are example rates. The RBA raised the cash rate on 29 September 2026, so current offers may be higher. The comparison works the same way at any rate.

At 5.5% over the remaining 25 years, the repayment falls by about $151 a month and total interest drops by about $45k before switching costs. The monthly difference uses the unrounded repayments.

Restart at 30 years and the repayment drops further. But that extra 5 years adds about $101k in interest compared with keeping 25 years at the same new rate. You even pay more interest than on the original 6% loan.

A longer term may still help if you need breathing room each month. I'd show you both costs so you can decide. Try the mortgage repayment calculator with your own balance and remaining term.

If you've got 15 years left, we can compare loans over 15 years. You can also keep the term and make extra repayments within the new lender's rules. Our extra repayment calculator shows how paying more changes the loan.

Equity is the home's value less what you owe. To spend some of it, you generally need to borrow more, and the lender checks whether you can afford that larger debt.

Say the home is worth $700k and you owe $400k. Borrowing up to 80% of the value would mean a $560k loan, leaving $160k of possible extra borrowing before fees and the lender's other checks.

You can ask for less. Here's the same home with $100k added for renovations.

Before borrowing the extra money, I'd look at the bank's valuation and what the larger repayments do to your budget. The equity calculator gives you a starting figure. Our loan-to-value calculator shows how much of the property's value you'd be borrowing.

You may get a better rate even if you don't need extra money. A higher property value or a smaller loan can move you into a cheaper pricing tier. The bank needs to accept that value first. If its valuation comes in lower, you may have less room to borrow or face an LMI cost.

For a small renovation, an approved loan increase may be enough. Structural work or an extension may need a construction loan, plans and a building contract.

A construction lender generally releases money to the builder in stages. Interest on that portion is charged on the money drawn. Keep the existing mortgage repayments in the budget while the work is underway.

Send us the plans and budget, including any work you'll do yourself. We'll check the funding approach before you commit to the builder. Our construction loan guide explains the process.

I'd hold off if you expect to sell or repay the loan before recovering the costs, if a break cost uses up the saving, or if a fresh LMI premium makes the switch expensive.

If the current bank's offer comes out ahead after the comparison, staying can be the better result. You don't need to change lenders for the review to have been useful.

Even after only 1 year, it's worth comparing your bank's best offer with the cost of leaving.

An offset is a separate account whose balance reduces the loan balance charged interest. Redraw is access to extra repayments already made into the loan. Their access rules can differ, so check transfer limits, fees and what happens as the loan is paid out.

I'd also check the app you'll use every week. Can you see each loan split, move money easily and manage multiple offsets if you need them? A small rate saving can feel less useful if the new setup makes your everyday banking harder.

Before settlement, agree where the old offset money goes and how available redraw affects the payout. If the property may later become an investment, get tax advice before moving money between the loan and accounts.

The RBA raised the cash rate to 4.60% on 29 September 2026. Nobody can promise where rates go next, so compare the offers available now and check again if rates change before settlement. A fixed rate gives certainty for its agreed period; whether it ends up cheaper depends on what variable rates do.