Refinancing
Refinance or ask your bank for a better rate: which saves more?
6 min read · By Daniel Lagden · 6 November 2026
The short version
- Ask your current lender first. Moneysmart's first suggestion for anyone thinking about switching is to say you plan to move and ask for a better deal.
- A rate cut from your own lender often saves less than switching on the headline, but it costs nothing to ask.
- Switching saves more only when the gap is big enough to outlast the costs, so work out the break even.
- Keep any new loan close to the years you have left. A longer term lowers the repayment and raises total interest.
When your rate feels too high, there are two ways to bring it down: ask your current lender for a better one, or move to a different lender. They look similar, but the cost, the effort and the saving are not the same. This guide compares them with one set of numbers so you can see which is worth doing first.
Quick summary: it usually makes sense to ask your current lender first. It costs a phone call and gives you a benchmark. Switch only if another lender beats that benchmark by enough to cover the costs of moving.
Why ask first
ASIC's Moneysmart website lists asking your current lender for a better deal as the first step when you are thinking of switching. The idea is to tell them you plan to move to a cheaper loan, because to keep your business they may reduce the rate on your existing loan. Having at least 20 per cent equity and a good credit score puts you in a stronger position. There is no guarantee, but whatever they offer becomes the figure every other option has to beat.
What each option is worth
Take a $600,000 loan with 25 years left, principal and interest, currently at 6.20 per cent. Suppose your lender cuts the rate to 5.95 per cent, or another lender offers 5.70 per cent and switching costs $1,500 in total.
| Option | Rate | Monthly repayment | Monthly saving | Five year repayment saving after costs |
|---|---|---|---|---|
| Stay as you are | 6.20% | $3,939.49 | n/a | $0 |
| Ask your lender for a cut | 5.95% | $3,847.49 | $92.00 | $5,520 |
| Switch to another lender | 5.70% | $3,756.53 | $182.96 | $9,478 |
Switching saves more in this example, about $9,478 over five years after costs against $5,520. It also takes longer, carries fees and means a new assessment. The break even on the switch is about 8 months ($1,500 divided by $182.96 is 8.2). These figures count lower repayments only, so the interest saved is a little higher, because more of each repayment goes to the balance. They are illustrative and assume the rates stay the same, which they will not in practice. The rates are hypothetical, not rates offered by any lender, and not comparison rates.
How to ask for a better rate
- Know your current rate, your balance and the years left on the loan.
- Check what other lenders are offering for your loan size and equity, so you have a benchmark.
- Call your lender and ask for the team that handles customers thinking of leaving.
- Ask for the new rate in writing and check it applies to your current product and its features.
- If they will not move, you have your answer, and a clear benchmark for switching.
When switching is likely to win
- The gap between your rate and the best offer is large.
- You want features your current loan lacks, such as an offset account or a better structure.
- You want to release equity or restructure, not only lower the rate.
- You will hold the loan for longer than the break even.
When asking is enough
- The gap is small, so the switching costs would eat most of the saving.
- You are on a fixed rate and the break fee is large.
- You have less than 20 per cent equity and a new lenders mortgage insurance premium could apply.
- You plan to sell before you would recover the costs.
Whichever way you go, keep the loan term close to the years you have left. Stretching the same balance across 30 years at 5.70 per cent drops the repayment to $3,482.40, but total interest rises to $653,665. Over the 25 years you have left, the same rate costs $526,959 in interest, so the extra five years add about $126,706.
General information only, current as at November 2026. Rates, fees and lender policy vary and change, and the figures here are illustrative, not a quote or a market benchmark. This does not take your circumstances into account. Confirm your own numbers with your lender or a credit professional.
Frequently asked questions
Will my bank really cut my rate if I ask?
It may. Moneysmart says lenders may reduce your rate to keep your business, and that having at least 20 per cent equity and a good credit score strengthens your position. There is no guarantee.
Does asking for a better rate affect my credit score?
A rate review with your existing lender usually does not need a new credit application, so it generally does not add an enquiry. Ask your lender to confirm how they handle it.
How often should I ask for a better rate?
You can ask whenever you like. It makes sense to check at least once a year, and any time your fixed rate period ends or your equity improves.
How do I know if switching is worth it?
Divide the total switching costs by the monthly saving to get the break even in months. If you will hold the loan longer than that, and the new loan has the features you need, it generally stacks up. Our guide on when refinancing actually saves money goes deeper.
Can a broker help with both options?
Yes. A broker can show how your rate compares with other lenders and what switching would cost, then help you with whichever path suits you.
Not sure your loan is worth switching?
Send us your current rate, balance and lender. We will tell you honestly whether switching is likely to save money after the costs, or whether a call to your lender is enough.
Check my refinance optionsGeneral information only. This article does not take into account your objectives, financial situation or needs, and is not credit assistance or financial advice.
