How Much Does It Cost to Refinance a Home Loan in Australia?
A lower interest rate can look like an easy win. But refinancing usually comes with costs of its own, from your current lender, your new lender or both.
The real question isn't “can I get a lower rate?” It's “will the savings actually outweigh the cost of switching?”
For some borrowers the upfront costs are recovered quickly. For others, fees or a fixed-rate break cost can change the picture completely.
If you're still weighing up whether switching lenders makes sense at all, our refinance home loan page is a good place to start.
There isn't one single refinancing fee
Depending on your loan and lender, you might come across several different costs. Some can be relatively small. Others can be significant enough to change whether refinancing makes sense at all.
Could you end up paying LMI again?
If you don't have much equity in your property, refinancing can sometimes trigger lenders mortgage insurance again, even if you paid it when you originally took out the loan.
This can be one of the bigger costs to investigate before committing to a new lender.
Your equity position will depend on the current value of the property and how much you still owe on the mortgage.
Don't assume the lower rate tells the whole story
A better advertised interest rate may still leave you worse off if the cost of moving is high.
This is why refinancing needs to be compared as a complete package, not just rate against rate.
How long will it take to recover the cost of switching?
A simple way to think about refinancing is to compare the upfront switching cost with the monthly saving you expect from the new loan.
Approximate time needed to recover the cost of switching.
If the upfront cost is low and the monthly saving is solid, that may happen relatively quickly. If the saving is small and the cost is high, it can take years.
Costs are only one part of the decision. If you're weighing up the bigger picture, we've also looked at whether refinancing your home loan is worth it.
Watch the loan term, not just the repayment
A lower monthly repayment can look like a win on paper.
But if refinancing resets your mortgage back to a full 30-year term, you could potentially pay more interest over time, even if the new loan has a lower rate.
It's worth comparing the full picture: your balance, interest rate, fees and remaining loan term, not just the monthly repayment.
Run the numbers first
Our home loan repayment calculator can help you compare how different rates and loan terms may affect repayments.
It's a useful starting point before deciding whether a lower rate actually translates into a better overall outcome.
Four questions worth asking first
Cashback offers aren't the whole story
A cashback can make a refinance look attractive at first glance.
But it's worth looking past the incentive to the loan itself, including the interest rate, ongoing fees, loan structure and how long you expect to keep the mortgage.
Refinancing an investment property?
The same broad principles apply, but there can be extra things to consider around loan structure, equity and how the lending fits with your wider plans.
Our investment loans page covers some of the lending considerations if that's the direction you're looking at.
Think about the purpose of the refinance
Are you trying to reduce interest costs, restructure debt, access equity or prepare for another purchase?
The right loan structure can depend just as much on what you're trying to achieve as the rate itself.
Every refinancing situation is different
The costs and potential savings depend on your lender, your equity, your loan structure and what you're trying to achieve.
A lower rate can be valuable, but the better question is whether changing loans leaves you in a stronger position after the cost of switching is taken into account.
If you want to explore the broader decision in more detail, read Is refinancing your home loan worth it?
Not sure whether refinancing actually stacks up?
Martin can look at your current home loan, talk through the potential costs of changing lenders and help you understand whether refinancing makes sense for your circumstances.
