How to Refinance Your Home Loan: Complete Guide

Interest rate reduction: If rates have fallen 0.5%+ since you borrowed, refinancing could save significantly. Better features: Switching to a loan with offset account, redraw facility, or better repayment flexibility. Debt consolidation: Combining high-interest debts into your lower-rate mortgage. Changed circumstances: Moving from fixed to variable (or vice versa) based on rate outlook. Equity access: Borrowing against increased property value for renovations or investments.

Compare your current rate to available rates. A 0.5% reduction on a $400,000 loan saves approximately $2,000 annually in interest. Over the remaining loan term, this compounds to tens of thousands. However, factor in refinancing costs: application fees ($250-$600), valuation fees ($150-$300), discharge fees from current lender ($150-$500), and potential break costs if exiting a fixed rate early.

Exiting a fixed rate loan before the term ends typically incurs break costs (economic cost to the lender). If rates have risen since you fixed, break costs can reach $10,000-$30,000+ depending on loan size and remaining fixed term. If rates have fallen, break costs might be minimal or zero. Always check break costs before refinancing from a fixed loan—they can eliminate all savings.

Step 1: Assess your current loan—rate, fees, features, break costs. Step 2: Research competitive offers (use a mortgage broker to compare lenders). Step 3: Apply for pre-approval with new lender. Step 4: Submit full documentation (income, assets, liabilities). Step 5: New lender orders valuation. Step 6: Formal approval issued. Step 7: Discharge current loan, settle new loan. Timeline: typically 4-6 weeks from application to settlement.

Similar to your original application: ID, income verification (last 2 payslips, tax returns if self-employed), 3-6 months bank statements, liability statements (credit cards, loans), property documents, and current mortgage statement. If your income or employment has changed since your original loan, be prepared to explain and document changes. Lenders reassess your borrowing capacity at refinance.

If your property has increased in value, you may have significant equity. Refinancing allows you to access this equity (borrow more) for renovations, investments, or other purposes. Example: You bought for $500,000 with $400,000 loan. Property now worth $650,000, loan reduced to $380,000. You have $270,000 equity. Lenders may allow borrowing up to 80% ($520,000)—a potential $140,000 access.

Before refinancing, try negotiating with your current lender. Many lenders offer rate discounts (0.2-0.5% reductions) to retain customers. This saves the time and cost of refinancing. Call your lender, mention you're considering refinancing, and ask for a rate review. If they won't budge or the discount is insufficient, proceed with refinancing. A mortgage broker can handle these negotiations.

Don't just chase the lowest rate—consider loan features that suit your situation. Do you want an offset account? Redraw facility? Extra repayment flexibility? Fixed or variable? Package loans with credit cards and fee waivers? Calculate total value including features, not just the interest rate. A slightly higher rate with an offset account might save more than the cheapest rate loan without one.