Home loan guide
Compare refinance savings, switching costs and your remaining loan term before changing your home loan.
A refinance is worth checking when your rate, loan features or borrowing needs have changed. Compare the cost of switching with the savings over your remaining loan term, not just the new monthly repayment.
Here are 9 reasons to review your home loan, with examples of where refinancing can help and where it can cost more.
Refinancing means replacing your existing home loan with a new one, either with your current lender or another lender.
The two main reasons people look to refinance their home loans are:
Ask your current lender to review your rate, then compare that offer with other loans you qualify for. A new lender still needs to accept your income, credit history and property.
A lower interest rate can reduce repayments and total interest if you keep the same remaining loan term. Extending the term can reduce the repayment while increasing the total cost.
For example, a $500,000 principal-and-interest loan at 6.64% over 30 years costs about $3,207 a month.
At 5.49% over the same 30 years, the repayment is about $2,836 a month, a reduction of about $371. These are example rates, not current loan offers.
On a phone, swipe the repayment table sideways to see all rates.
Loan Amount | 5.00% | 5.25% | 5.50% | 5.75% | 6.00% | 6.25% |
$350,000 | $1,879 | $1,933 | $1,987 | $2,042 | $2,098 | $2,155 |
$400,000 | $2,147 | $2,209 | $2,271 | $2,334 | $2,398 | $2,463 |
$450,000 | $2,416 | $2,485 | $2,555 | $2,626 | $2,698 | $2,771 |
$500,000 | $2,684 | $2,761 | $2,839 | $2,918 | $2,998 | $3,079 |
If both rates stayed unchanged for all 30 years, the difference in total repayments would be about $133,454. That excludes refinancing fees. In practice, rates and loan balances change, so compare the costs over the period you expect to keep the loan. Use the Moneysmart mortgage switching calculator to compare your own loan.
CLIENT STORY · LOAN HEALTH CHECK · 2026
A little over six months after their loan settled, our clients asked us for a home-loan health check. We reviewed their pricing in 2026, negotiated with the lender and secured a reduction from 6.28% to 6.19%.
We followed the change through and confirmed to our clients that the new rate had been applied. They thanked us for how quickly it was done. We also offered another review at the loan’s anniversary so they had a clear opportunity to check their pricing again.
Historical client rates from 2026, not current offers. Your rate and outcome depend on your circumstances and the lender’s assessment.
A lower repayment can come from a longer loan term as well as a lower rate. Separate those two effects before deciding.
If you have 25 years left and refinance to a new 30-year term, you add 5 years to the repayment schedule.
The extra years can outweigh the benefit of the lower rate. The comparison below holds the loan amount and rate constant so you can see the effect of the term alone.
Both options below borrow $500,000 at 5.99%, with monthly principal-and-interest repayments. The rate stays unchanged and fees are excluded. On a phone, swipe the table sideways to see every column.
Option | New Loan Term | Monthly Repayment | Total Interest Paid | Interest difference |
Longer term | 30 years | $2,995 | $578,034 | About $112,500 more |
Existing term | 25 years | $3,218 | $465,535 | About $112,500 less |
When comparing refinance quotes, ask for the same remaining term as your current loan. The lender still needs to approve that repayment schedule.
If you have 22 years left, compare a 22-year refinance first. You can then assess whether the payment is affordable without adding years to the debt.
A higher lender valuation can reduce your loan-to-value ratio (LVR). That may open up a different rate tier, depending on the lender and loan.
A $450,000 loan against a $500,000 home has a 90% LVR. If the lender now values the home at $600,000 and the balance is unchanged, the LVR is 75%. Compare the rates available at that level; a discount is not automatic.
It is very common in Australia to have a fixed rate term of between 1 to 5 years. When your fixed rate finishes (or expires in bank talk) at the end of that 1 to 5-year period, your loan will change back to a variable rate.
Check the rate your loan will revert to when the fixed period ends. Compare it with the lender's other offers and refinancing options, including any fees.
Check to see if you are eligible for a home loan
If you can afford more each month, a shorter term can reduce total interest. You may also be able to make extra repayments on your existing loan without refinancing. Check repayment limits first.
Let's go back to the example above. Say you had a home loan of $500,000, and you refinanced your loan to a new interest rate of 5.49%.
At 5.49%, paying $3,205 a month instead of the minimum of about $2,836 would repay this $500,000 loan in about 274 months. Compared with the 30-year schedule at that same rate, that is about 86 months earlier and roughly $142,600 less interest.
That is about 7 years and 2 months sooner. The example assumes the rate stays at 5.49%, repayments are monthly and there are no extra fees.
A cash-out refinance increases your loan using the property as security. You might use the funds for renovations or an investment, but the lender must accept the purpose and your ability to repay the larger debt.
For example, a $600,000 lender valuation and a $450,000 balance leave $150,000 in equity. Borrowing up to 80% of that valuation gives a total loan of $480,000, or $30,000 extra before fees. Approval depends on your income and the lender's cash-out policy.
When looking to access cash, many borrowers don't realise that banks can vary significantly in how they value your property.
One bank might value your home at $800,000, while another sees it at $850,000. That $50,000 difference could be the key to releasing enough cash for your renovation or keeping your Loan-to-Value Ratio (LVR) under 80% to avoid paying Lenders Mortgage Insurance.
We can check whether upfront valuations are available before you apply. A different valuation may change the options, but the lender must also accept the property and your application.
After you've been in your home for a few years, you might feel it's time to do some renovations. These generally fall under 2 categories:
If a lender accepts an on-completion valuation of $700,000, borrowing 80% gives a $560,000 loan limit. Against an existing $450,000 balance, that leaves $110,000 before fees and other costs. The valuation and approval are not guaranteed.
Lastly, you can refinance to consolidate other loans and debts into a single and possibly more affordable payment. This can be handy in situations where you have high-interest-rate loans and debts like credit cards, personal loans or car loans.
A debt consolidation home loan refinance works similarly to a cash-out refinance, where an increased portion of the loan can be used to pay out other loans and debts. Your old home loan would increase by the amount you used to pay off those other debts.
Consolidation can lower the rate on other debts, but it secures them against your home. Spreading a short-term debt over a long mortgage can increase total interest. Compare a separate repayment schedule for that portion and include switching costs.
If your bank's app or service makes the loan difficult to manage, include that in your comparison. Check the features you actually use and their fees before switching.
Depending on the lender, useful features can include:
Would you like to learn about your situation?
Some home loan packages charge an annual fee and include an offset account or credit card. Use your own product's current fee when comparing a package with a basic loan.
For example, a $395 annual fee adds up to $11,850 over 30 years if it never changes. Compare that cost with the interest saved through the offset and any other benefits you use.
Compare a basic loan
A basic loan may have fewer ongoing fees, but it may also omit an offset account or other features. Compare the rate, fees and features together.
A lower lender valuation can reduce your equity and make refinancing harder. Use a current valuation rather than assuming the purchase price still applies.
While there are heaps of benefits to refinancing your loan, you must remember there are still costs to complete the loan application. You may have to pay some of the following costs when refinancing your home loan.
Get an itemised quote for your lender and state. Discharge, registration and settlement fees vary; fixed-rate break costs or a new LMI premium can make the total much higher.
If a lender offers cashback, check the eligibility rules, deadline and payment conditions. Include it in the net cost calculation, but compare the ongoing rate and fees too.
Send us your balance, current rate, remaining term and the reason you want to refinance. We can compare the cost of staying with your lender against switching.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
Client examples are based on real situations. Names and identifying details have been changed.
