If you refinance your home loan, you’re swapping your current mortgage for a new one — either with your existing bank or a different lender — usually to get a better rate, better features, or access to the equity you’ve built up. It sounds simple, and for a lot of people it is. But whether it’s actually worth it depends on your numbers, not a headline rate.
This guide walks through how refinancing actually works, what it costs, when it makes sense, and when it doesn’t — including a real example of what a rate drop looks like in dollars.
What Is Mortgage Refinancing?
Mortgage refinancing is the process of replacing your existing home loan with a new one, either through your current lender or a different one. It’s one of the core parts of our home loans, refinancing and investment lending services — the new loan pays out the old one, and you start repaying the new loan under its terms instead.
People refinance for all sorts of reasons: a lower interest rate, a fixed-rate period ending, better features like an offset account, or to release some equity for renovations or another purchase. It’s not a one-off event either — you can refinance more than once over the life of a loan if your circumstances or the market change enough to justify it.
How Does Refinancing a Home Loan Work?
Refinancing works by using a new loan to pay off your existing mortgage, then continuing your repayments under the new loan’s rate and terms. The process runs in roughly four stages: compare loans, apply, get approved and valued, then settle — at which point your old loan is discharged and the new one takes over.
In practice, that means working out what you actually need from a loan (rate, offset, fixed vs. variable), comparing options against your current deal, submitting an application with proof of income and asset details, and going through a property valuation before the new lender pays out your old one. None of those steps are unusual — it’s the same process as applying for your first home loan, just with an existing mortgage to close out along the way.
Should You Refinance — And When’s the Right Time?
You should consider refinancing when the savings or new features are worth more than the cost and hassle of switching — commonly when interest rates have moved, your fixed term is ending, or your financial situation has changed. There’s no fixed rule for timing, but a few triggers come up again and again.
The clearest signal is a rate gap: the spread between the cheapest and most expensive variable rates on the market can run past 2 percentage points, so if you haven’t checked your rate in a while, it’s worth a look. A fixed-rate period ending is another natural trigger, since your loan usually reverts to a standard variable rate at that point. Beyond rate, people refinance to consolidate other debts into their mortgage, access equity, or move to a loan with features their current one doesn’t have.
When Should You Not Refinance?
You shouldn’t refinance if the costs of switching outweigh what you’d save, or if you’re planning to sell or pay off the loan soon enough that you won’t recoup those costs. Refinancing isn’t free, and a small rate improvement can be wiped out by fees if you’re not staying in the loan long enough.
A few situations where it’s worth pausing: if you’re weighing up fixed vs variable and you’re still well inside a fixed term, breaking early can trigger a break cost that erases any saving. If your equity has dropped — say property values have fallen or you’ve borrowed more — you may fall back under the 80% loan-to-value threshold and get hit with Lenders Mortgage Insurance again, even if you didn’t pay it originally. And if you’re only a year or two off finishing the loan, the switching costs rarely pay for themselves in the time you’ve got left.
How Much Does Refinancing Cost?
Refinancing typically costs somewhere between a few hundred and a few thousand dollars, depending on your lender, loan type, and whether you’re on a fixed rate. The main costs are a discharge fee to close your old loan, an application fee to open the new one, and sometimes a property valuation or settlement fee.
Here’s the fuller breakdown of what refinancing can cost: a break cost if you exit a fixed loan early, a discharge or exit fee from your current lender, a loan establishment fee for the new one, a property valuation fee (sometimes waived or bundled into the application fee), a settlement fee, and a mortgage registration fee charged by your state or territory government. None of these are deal-breakers on their own — the point is to add them up and check they’re smaller than what you’ll save.
Can You Refinance With Your Current Bank?
Yes — refinancing with your current bank (sometimes called an internal refinance) is an option, and it’s worth doing before you commit to switching lenders. Because it avoids some of the switching costs and paperwork, many people check this first.
It’s worth contacting your existing lender before refinancing elsewhere and telling them you’re planning to switch to a cheaper loan — banks will sometimes match or beat a competitor’s rate to keep your business, especially if you’ve got at least 20% equity to bargain with. If they can’t get close to what’s on the market, that’s your cue to start comparing lenders properly instead of assuming loyalty gets you the best deal.
What Does Switching Home Loans Actually Involve?
Switching home loans means the practical, paperwork side of refinancing: applying for the new loan, providing proof of income and assets, getting a valuation done, and letting the new lender pay out and discharge your old mortgage. It typically takes a few weeks from application to settlement, not months.
There’s not much for you to actively do once your application is approved and settlement is booked — no property exchange, no moving day. Your new lender pays out the old loan, registers the new mortgage against your property title, and your repayments simply continue under the new loan from that point. The main thing worth double-checking during this stage is whether you have an offset account, since switching can break the link between it and your mortgage if it isn’t set up correctly on the new loan.
How Can a Refinance Calculator Show Your Savings?
A refinance calculator shows you the gap between what you’re paying now and what you’d pay on a new rate, so you can see the dollar saving before you commit to anything. The number that matters isn’t the rate difference on paper — it’s what it does to your monthly repayment.
Here’s what that actually looked like for one of our refinance calculator clients: a $750,000 home loan, refinanced from 6.54% down to 6.04% through a fast refinance option. On a standard 30-year principal and interest loan, that 0.5% drop works out to roughly this:
| Before | After | |
|---|---|---|
| Loan amount | $750,000 | $750,000 |
| Interest rate | 6.54% | 6.04% |
| Est. monthly repayment | ~$4,761 | ~$4,517 |
| Est. monthly saving | — | ~$240 |
| Est. annual saving | — | ~$2,900 |
Figures are illustrative, calculated on a standard 30-year P&I loan — your actual saving depends on your loan term and structure.
That’s not a huge headline number, but it’s real money back in the household budget every month, for the cost of a bit of paperwork.
Why Use a Mortgage Broker to Refinance?
A mortgage broker is worth using because they compare your refinance across multiple lenders at once, rather than you calling around banks one by one — and in Australia, that’s now how most people refinance. If you’re new to the idea, here’s why using a broker tends to make the process easier. Mortgage brokers settled a record 81% of new home loans in the March 2026 quarter, up from 55.3% just eight years earlier.
At Click Financial, we compare your refinance across our panel of 40+ lenders rather than pushing whatever product we’re paid to sell — because we recommend the loan that suits you, not the one that suits us. That’s the whole point of using a broker over going direct to one bank: your dedicated broker does the rate comparison, handles the paperwork, and manages the application through to settlement, so you’re not doing four separate bank appointments to work out who’s actually offering the better deal.
If your rate hasn’t been checked in a while, it costs nothing to find out where you stand. Have a no-obligation chat with one of our brokers, or use our refinance calculator to see what switching could look like for your loan.
Frequently Asked Questions
How does refinancing a home loan work?
Refinancing works by using a new loan to pay off your existing mortgage, then continuing your repayments under the new loan’s rate and terms. The process runs through comparing loans, applying, valuation, and settlement.
Should I refinance my home loan?
You should consider refinancing when the savings or new features are worth more than the cost of switching — commonly when rates have moved, your fixed term is ending, or your situation has changed.
When should you not refinance?
You shouldn’t refinance if the switching costs outweigh the savings, particularly if you’re on a fixed rate well inside its term, your equity has dropped below 80% LVR, or you’re close to paying off the loan anyway.
How much does refinancing cost?
Refinancing typically costs a few hundred to a few thousand dollars, covering a discharge fee, application fee, and sometimes a valuation or settlement fee, depending on your lender and loan type.
Can I refinance with my current bank?
Yes, refinancing internally with your current bank is an option and is worth checking first, since banks will sometimes match a competitor’s rate to keep your business.
Why use a mortgage broker to refinance?
A broker compares your refinance across multiple lenders at once instead of you approaching banks individually, which is why brokers now settle the majority of new home loans in Australia.
This article was written by the Click Financial team, licensed mortgage brokers.