Help guide
When refinancing a home loan is worth it in Australia
The full switching cost, the break-even months formula, the 30-year term reset that erases the saving, and why asking your own lender first usually wins.
The break-even calculation, done properly
One calculation: total switching costs divided by the monthly saving, giving the number of months before a switch pays for itself. On a $600,000 loan, moving from 6.59% to 6.09% saves about $196 a month, so $1,200 of switching costs breaks even in a little over six months. The arithmetic only misleads when the cost side is understated.
The full cost side is a discharge fee from the outgoing lender, commonly $150 to $400; state land titles discharge and registration fees of roughly $150 to $350 depending on the jurisdiction; an application, settlement or valuation fee at the new lender, often $0 to $600 and frequently waived on refinance campaigns; fresh LMI if your LVR is above 80%; and break costs on any fixed portion.
The 30-year reset that erases the saving
This is the most expensive detail in Australian refinancing and almost no comparison table shows it. A borrower eight years into a 30-year loan who refinances back to 30 years has just bought eight extra years of interest. On a $500,000 balance at 6.09%, holding the remaining 22-year term costs about $3,442 a month; resetting to 30 years drops it to about $3,027 and adds roughly $181,000 of interest.
The lower repayment is what makes the reset feel like a win, which is why close to half of Australian refinancers take it. If cashflow is the reason, reset deliberately and say so out loud. If interest saving is the reason, ask the new lender to match your remaining term — most will do it on request, and none will offer it unprompted.
Ask your own lender first
Retention pricing is real and costs nothing to trigger. Australian lenders routinely price existing loans above the rate they advertise to new customers, and that loyalty gap has run around 40 to 50 basis points through 2026. A call or secure message to the retention team, quoting a competitor’s advertised rate and your current LVR, often produces a discount within a few days.
Do it before you lodge anywhere. A reprice costs no fees, no valuation, no credit enquiry and no term reset, and 40 basis points on a $600,000 balance is worth about $153 a month. If the answer is no, you have lost a week and gained a written position to take to the next lender.
When a refinance is likely to fail
Three things change the answer entirely. The first is a fall in your property’s value: national dwelling values fell again in August 2026 on Cotality’s index, the fifth monthly decline in a row and 3.6% below the March 2026 peak, so a borrower who bought at a high LVR early in the year may now face fresh LMI or be unable to switch at all.
The second is serviceability. A refinance is new lending, assessed at your actual rate plus the 3 percentage point buffer APRA reconfirmed in May 2026, and a loan written years ago may not re-approve on today’s test. The third is changed circumstances since the original application — self-employment, reduced income, a new dependant, or debt taken on since.
Cashback, and why the billboard number is not the number
Cashback offers have thinned since their peak but still appear, usually $2,000 to $4,000 and conditional on a minimum loan size and an LVR below 80%. Three conditions decide whether the money is real: the clawback window during which discharging requires you to repay it, the rate you land on after any introductory period, and whether the offer is funded by a higher ongoing rate.
Compare over your intended hold period rather than year one. A $3,000 cashback against a rate 25 basis points higher on a $600,000 loan costs about $97 a month, so the cashback is fully spent inside three years. Treat it as a tiebreaker between two loans you would take anyway, never as the reason to switch.
How long you will actually hold the loan
Break-even months only mean something measured against a hold period. If you expect to sell within two years, most refinances lose money once the discharge fee at the far end is counted alongside the one at the near end. If you fix any portion, the break cost on a future exit belongs in the same calculation, and it cannot be known in advance because it tracks wholesale rate movements.
The cash rate is 4.35% after three rises during 2026, the Reserve Bank held unanimously on 11 August, and the next decision lands on 29 September. That environment rewards structural decisions — term, buffer, offset — over attempts to time a rate. Azure Home Loans models retention against an external switch on term-for-term maths before anything is lodged, and this page is orientation rather than a rate quote or personal credit advice.
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FAQ
How do I calculate the break-even point on a refinance?
Divide total switching costs by the monthly repayment saving. Costs of $1,200 against a $196 saving break even in about six and a half months. Include the discharge fee, state registration and discharge fees, any new lender application or valuation fee, fresh LMI above 80% LVR, and fixed-rate break costs. Exclude any saving that comes from resetting the term.
How much does it cost to refinance a home loan in Australia?
Commonly $600 to $1,500 all in for a straightforward variable-to-variable switch: a discharge fee of roughly $150 to $400, state land titles fees of about $150 to $350, and a new lender application or settlement fee of $0 to $600 that is often waived on refinance campaigns. Fresh LMI above 80% LVR can add several thousand more.
Is it worth refinancing for 0.5%?
Usually yes on a large balance and often not on a small one. Half a percent on $600,000 is about $196 a month, which recovers typical switching costs in well under a year. On a $200,000 balance the same margin is about $65 a month, so identical costs take close to two years to recover — long enough that your remaining term and hold period decide it.
Will refinancing reset my loan term to 30 years?
It will unless you ask otherwise. Most lenders default a refinance to a fresh 30-year term, which lowers the repayment and raises total interest, sometimes by more than the rate saving is worth. Ask explicitly for a term matching your remaining years. If you want the lower repayment, take the reset knowing its cost rather than by accident.
Can I refinance if my property has dropped in value?
Only if your loan-to-value ratio still fits the new lender’s policy. With values 3.6% below the March 2026 peak after five consecutive monthly falls, a borrower who bought at 95% LVR early in 2026 may be unable to switch, or able to switch only by paying a second full LMI premium. Get a valuation view before lodging anything.
Should I ask my current lender for a better rate first?
Yes, almost always. Repricing costs nothing, takes days rather than weeks, and avoids fees, a credit enquiry, a valuation and a term reset. The gap between existing and new-customer pricing has run around 40 to 50 basis points through 2026. Quote a competitor’s advertised rate and your current loan-to-value ratio when you ask, and get the answer in writing.
Do I have to pay LMI again when I refinance?
If your loan-to-value ratio at the new lender is above 80%, yes. LMI is not portable between lenders and the original premium is not refunded, so a high-LVR switch means a second full premium on the new loan. It is the main reason borrowers who bought with a small deposit stay put and negotiate on rate instead of switching.
Does refinancing hurt your credit score?
Modestly and temporarily. The application records a credit enquiry, and closing a long-held account removes some account age from your file. One enquiry is unremarkable; several across different lenders in a short window is what assessors notice. Australia has had two credit bureaux since Experian and illion merged on 1 April 2026, so the pattern is easier to read whole.