Refinancing
When refinancing actually saves you money (and when it doesn't)
11 min read · By Daniel Lagden · 22 April 2026
The short version
- The rate is only the third or fourth thing that matters in a refinance.
- Refinancing wins when structure, fees and net savings beat the friction of moving.
- Factor discharge, settlement and registration fees before deciding.
- Sometimes the smart move is a rate review with your current lender, not a switch.
Refinancing saves you money when the benefit clears the cost of switching within a period you are actually going to stay put for. That sounds obvious and it is routinely ignored, because the rate is the number people compare and the rate is only one of five variables that matter. Plenty of borrowers switch to a lower rate and end up worse off.
Quick summary: work out your break even. Add up the switching costs, divide by the monthly saving, and that is how many months until you are in front. If that number is longer than you plan to hold the loan, or longer than you can predict your circumstances, the switch is not obviously worth it. In 2026 there is a second question too: whether you can even qualify.
What does switching actually cost?
| Cost | Typical range | Notes |
|---|---|---|
| Discharge fee, current lender | $350 to $600 | Almost always applies |
| Settlement and registration | Around $400 | Titles office charges |
| Application or establishment fee | Nil to around $800 | Often waived on a competitive offer |
| Valuation | Often waived | Charged on more complex properties |
| Fresh mortgage insurance | Potentially thousands | Only if still above 80% LVR, and it is not portable |
| Break costs on a fixed loan | Highly variable | Can be very large, ask before you commit |
The two rows at the bottom are the ones that turn a good idea into a bad one. Mortgage insurance is generally not transferable between lenders, so refinancing above 80 per cent can mean paying a second premium. And breaking a fixed rate can cost enough to wipe out years of savings, particularly when rates have moved against the lender since you fixed.
How do you calculate the break even?
Total the costs, work out the genuine monthly saving, and divide. If switching costs $1,200 and saves $180 a month, you are in front after about seven months, which on a loan you intend to hold for years is clearly worth doing. If it costs $1,200 and saves $40 a month, the break even is two and a half years, and that is a different decision entirely.
One refinement that changes answers. Compare like with like on the remaining term. A lower rate on a loan reset to thirty years can produce a smaller monthly repayment while costing you far more in total interest, because you have extended the debt. If you refinance, ask for the new loan to match your remaining term rather than restarting the clock.
This is the most common way a refinance quietly costs money. The repayment goes down, the borrower feels better off, and the total interest goes up because five years of amortisation was thrown away. Matching the term is usually a simple request and it is worth making every time.
What are the good reasons to refinance that are not about rate?
- Escaping a revert rate after a fixed term ends, which is where the largest gaps usually sit.
- Releasing equity for a renovation, a deposit on another property, or consolidating higher cost debt.
- Restructuring: splits, offsets, or moving between interest only and principal and interest as circumstances change.
- Removing or adding a borrower, after a separation or when a guarantor is being released.
- Getting out of a product that no longer fits, for example a loan with no offset when your savings pattern would benefit from one.
Consolidation deserves a caution. Rolling a car loan or credit card into a mortgage lowers the repayment because you have stretched a short debt over thirty years. That can be the right call for cash flow, but unless you also pay it down faster you will pay far more for that car by the end.
Can you even qualify in 2026?
This is the question that did not need asking a few years ago. A refinance is assessed as a new loan, so you have to pass current serviceability at a rate three percentage points above the actual rate, and the property has to value up. Rates rose three times in the first half of 2026 before being held, which lifted the assessment hurdle for everyone.
The result is that a meaningful share of borrowers with perfect repayment histories cannot switch. If that is you, there are still options with your existing lender, and it is worth reading our guide on what to do when you cannot refinance rather than assuming nothing can be done.
When is refinancing clearly not worth it?
- The saving is small and the costs are not, so the break even runs past your likely holding period.
- You are on a fixed rate with break costs that swamp the benefit.
- You are above 80 per cent LVR and would trigger a fresh mortgage insurance premium.
- You are planning to sell within a year or two.
- Your existing lender will match or nearly match the offer, which costs you nothing and takes one phone call.
That last one is the most overlooked free option available to any borrower. A retention request is not a new application, so it involves no credit enquiry and no reassessment. Ask before you switch, every time.
Should you refinance or ask for a rate review?
Always ask first, because a rate review costs nothing and risks nothing. It is not a new credit application, so there is no enquiry on your file and no fresh serviceability assessment. You are simply asking your existing lender to reprice a loan they already hold.
Retention pricing is real and it is usually only applied when a customer asks. The reason is straightforward: a lender has no incentive to reduce your rate unilaterally, and considerable incentive to keep you if you look like leaving. Mentioning that you are comparing the market is legitimate and effective, provided it is true.
| Option | Cost | Risk | Try it when |
|---|---|---|---|
| Rate review with your lender | Nothing | None | Always, first |
| Refinance to a new lender | $700 to $1,500 plus | Must requalify | The gap is material and you can qualify |
| Restructure with your lender | Usually small | Low | The product no longer fits |
How does refinancing to release equity work?
Releasing equity means borrowing against the increased value of a property you already own, usually to fund a renovation, a deposit on another property, or to consolidate more expensive debt. Usable equity is generally the difference between 80 per cent of the current valuation and what you still owe, since going above 80 per cent reintroduces mortgage insurance.
Two things determine whether it works. The valuation has to support the figure you are relying on, which is not guaranteed in a flat market. And you have to service the larger loan at the buffered assessment rate, which is where equity releases most often fail: the equity exists on paper but the serviceability does not.
If you are releasing equity to invest, keep the borrowing structurally separate rather than lumping it into your existing home loan. Mixed purpose debt makes the deductible portion harder to evidence and harder to unwind later. Speak to your accountant about it before the loan is written, not after.
What about consolidating other debts?
Rolling a car loan, personal loan or credit card into your mortgage lowers your monthly outgoings, because you have moved a short debt onto a thirty year term at a lower rate. That can be genuinely helpful for cash flow, and it is also how people end up paying for a car for three decades.
The discipline that makes consolidation work is keeping the repayment where it was. If you consolidate a $500 monthly car payment into your mortgage and your repayment rises by $150, direct the other $350 at the loan as an extra repayment. Do that and consolidation saves you money. Absorb the difference into daily spending and it costs you.
How long does a refinance actually take?
Commonly three to six weeks from application to settlement, though it varies with lender queues and how quickly the outgoing lender processes the discharge. The discharge is usually the slowest part and it is the part nobody can hurry, so submitting the discharge authority early is worth doing.
Two timing points matter. If you are refinancing to escape a fixed rate expiry, start about three months out so the switch completes before the revert rate applies. And keep making your existing repayments right up to settlement, because a missed payment during the process can jeopardise the new approval.
General information only, current as at August 2026. Fees, break costs, mortgage insurance premiums and lender policy vary and change, and the figures here are indicative rather than quotes. Confirm your own numbers before acting. This is not credit advice.
Frequently asked questions
How much does it cost to refinance a home loan?
Commonly around $700 to $1,500 in discharge, settlement and registration fees, though a fresh mortgage insurance premium or fixed rate break costs can make it far more.
How do I work out if refinancing is worth it?
Divide the total switching cost by the monthly saving to get your break even in months. If that is shorter than you plan to hold the loan, it generally stacks up.
Will refinancing extend my loan term?
It will if you let it. Many refinances reset to thirty years, which lowers the repayment while increasing total interest. Ask for the new loan to match your remaining term.
Do I pay mortgage insurance again when I refinance?
Possibly, if you are still above 80 per cent of the property value. LMI is generally not transferable between lenders, so a new premium can apply.
Can I refinance while on a fixed rate?
Yes, but break costs apply and they can be substantial. Always ask your lender for the actual figure before deciding, since it varies with rates and remaining term.
Should I ask my current lender first?
Almost always. A retention request is not a new application, so there is no credit enquiry and no reassessment, and it costs you nothing but a phone call.
What if I cannot qualify to refinance?
You are not out of options. A rate review with your existing lender needs no new assessment, and structural changes may still be available. Our guide on what to do when you cannot refinance covers this.
