How to Refinance Your Home Loan: A Step by Step Guide

Key Highlights

If you have not reviewed your home loan in the last two years, you are likely paying more than you need to
Refinancing means replacing your existing home loan with a new lender or product. The new loan pays out the old one at settlement
A 0.5% rate reduction on a $600,000 loan with 25 years remaining saves approximately $160,000 in total interest
The break even point is typically just 2 to 5 months for variable rate borrowers switching lenders, after accounting for discharge and setup fees
Fixed rate borrowers should always request an exact break cost figure from their lender before proceeding. This can be tens of thousands of dollars if rates have fallen since you fixed
Most cashback offers from lenders ($2,000 to $4,000) cover switching costs entirely, making the break even point immediate for many borrowers
A mortgage broker compares 50-plus lenders simultaneously, submits one application, and handles the full process from assessment to settlement at no cost to the borrower
Refinancing typically takes 2 to 4 weeks from approval to settlement and is materially simpler than buying a property
A free home loan health check with Stanford Financial takes 15 minutes and tells you whether your current loan is competitive and what switching could be worth in real dollars

If you haven’t looked at your home loan in the last two years, there is a reasonable chance you are paying more than you need to. Banks rely on the fact that most borrowers rarely look at their loan once they have it. The rate you signed up for is almost never the best rate available to you today.

Refinancing is the process of switching your home loan to a new lender or product. It can reduce your interest rate, lower your monthly repayments, give you access to features your current loan lacks, or unlock equity you have built up in your property. Done well, it can save tens of thousands of dollars over the remaining loan term. Done poorly, or at the wrong time, the switching costs can outweigh the benefit.

This guide walks you through the full refinancing process step by step: what to check, what to compare, how to calculate whether it’s worth it, and what to expect from application through to settlement. We also cover the mistakes that trip people up, particularly around fixed rate break costs.

Stanford Financial specialises in refinancing. Our brokers compare your current loan against 50+ lenders at no cost, negotiate on your behalf, and handle the paperwork from application to settlement. Book a free home loan health check

When Refinancing Makes Sense (and When It Doesn’t)

Refinancing is worth serious consideration in most of the following situations:

Your loan is more than two years old and you have not negotiated a rate reduction in that period
Your current rate is more than 0.5% above the most competitive variable rates available for your LVR and loan size
Your financial situation has improved since you took out the loan (higher income, reduced debt, or more equity) and you may qualify for a sharper rate
You want features your current loan lacks: an offset account, unlimited extra repayments, or a redraw facility
You want to access equity for renovations, an investment purchase, or another purpose
You want to consolidate expensive personal debt into your home loan to reduce your total repayment burden

When refinancing may not be worth it

You are in the final years of your loan. The remaining interest is relatively small and the benefit of a rate reduction is limited
You are locked into a fixed rate with significant break costs. Always get the exact figure from your lender before proceeding
Your property value has fallen and your LVR has risen above 80%. LMI could apply on the new loan, adding a cost that may eliminate the saving. Use our LMI calculator to check
Your income or employment has changed materially and you may not qualify for the same loan terms

The biggest risk in refinancing is acting on a vibe rather than on numbers. Before you do anything, use our refinance savings calculator to see your monthly saving, annual saving, and break even point. If the numbers work, refinancing is one of the best financial actions available to a homeowner.

What Is Refinancing?

Refinancing means replacing your existing home loan with a new one, either with a different lender or as a different product with your existing lender. The new loan pays out the old one at settlement. From that point, you make repayments to the new lender at the new rate and terms.

There are two main types of refinance:

Rate and term refinance: you switch to a lower rate or different loan structure (fixed vs variable, offset account, etc.) without changing the loan amount. This is the most common type.
Cash out refinance (equity release): you borrow more than the outstanding balance and receive the difference in cash. This requires sufficient equity and the new, higher loan amount must be serviceable at current lending criteria.

Top Reasons Australians Refinance

Reason	What it means in practice
Get a lower rate	Save $200 to $600 per month on a $600k loan depending on the rate difference
Access equity	Fund renovations, an investment property deposit, or a major purchase using equity you have built up
Better loan features	Add an offset account, unlock unlimited extra repayments, or remove LMI fees built into the rate
Debt consolidation	Roll expensive personal loans or credit cards into the home loan at a lower rate
Shorter loan term	Maintain the same repayment on a lower rate to pay the loan off years earlier
Change rate type	Switch from variable to fixed for certainty, or exit a fixed period once it ends
Remove a party	After relationship breakdown or change in circumstances, remove one borrower from the loan

Step 1 Review Your Current Loan

Before comparing anything else, you need to know exactly what you are starting from. Pull out your most recent loan statement and note the following:

Current interest rate: is it the advertised rate, a discounted rate, or a loyalty rate you negotiated? Is it fixed or variable?
Outstanding balance: this determines your LVR and what rate you are likely to qualify for with a new lender
Remaining term: how many years are left? This affects how much total interest you will save from a rate reduction
Monthly fee: some loans charge an ongoing monthly or annual fee. Factor this into your comparison
Discharge fee: your lender will charge a fee to formally close the loan, typically $150 to $500
Fixed rate period: if you are in a fixed period, note when it ends. Exiting before the end date can trigger break costs (see the break cost section below)

Tip: Many borrowers have not spoken to their current lender in years. Before applying anywhere else, call your lender and ask for a rate review. Sometimes a five-minute call mentioning that you are considering refinancing is enough to get a retention rate that is competitive. If it is, great. If it isn’t, you have a confirmed number to compare against.

Step 2 Know Your Equity Position

Your equity is the difference between your property’s current market value and your outstanding loan balance. Equity determines your Loan to Value Ratio (LVR), which is the single most important factor in what rate you will be offered by a new lender.

LVR = Outstanding Loan Balance ÷ Current Property Value

As a general guide:

LVR under 60%: best rates available. Very strong negotiating position
LVR 60 to 80%: competitive rates, no LMI. The standard tier for most refinancers
LVR 80 to 90%: rates are higher and LMI may apply on the new loan
LVR above 90%: refinancing becomes difficult and LMI costs could eliminate the saving

To estimate your current property value, use recent comparable sales in your suburb or a tool like CoreLogic’s free estimator. For a formal valuation, most lenders will arrange this as part of the refinancing process at no cost to you.

Accessing equity

If your LVR is below 80%, you have accessible equity. You can borrow against it without LMI and use the funds for any legitimate purpose, commonly renovations, an investment property deposit, or debt consolidation. The new loan amount is your outstanding balance plus the equity you want to access, which must keep the combined LVR at or below 80% (or above 80% if you are willing to pay LMI on the difference).

Example: Property worth $850,000. Outstanding loan: $450,000. LVR: 53%. Accessible equity to 80% LVR: $850,000 × 80% − $450,000 = $230,000. You could refinance to a new loan of up to $680,000 and receive $230,000 in cash at settlement, with no LMI payable.

Step 3 Compare Your Options

This is where most people go wrong: comparing only on interest rate. A lower headline rate is important, but it is not the whole picture. Here is what to evaluate:

Interest rate type

Variable Rate	Fixed Rate
Rate moves with RBA and lender decisions	Rate is locked for 1 to 5 years
Unlimited extra repayments (most lenders)	Extra repayments often capped at $10,000/yr
Full offset account access	Offset account usually not available
No break costs to exit	Break costs can be large if exiting early
Less certainty in repayment amount	Certainty of repayment for fixed period

Many borrowers opt for a split loan: part fixed for certainty, part variable for flexibility, extra repayments, and offset access. The split can be any proportion and is a practical way to hedge.

Loan features

Offset account: a transaction account linked to the loan that reduces the balance interest is charged on. See our offset account calculator to model the saving for your balance
Redraw facility: access extra repayments you have already made, useful but less flexible than an offset
Extra repayments: can you make unlimited extra repayments without penalty? This is critical if you intend to pay down faster
Portability: can the loan move with you if you sell and buy another property? Useful if you are likely to move

The full cost comparison

Compare loans on their comparison rate, which incorporates the interest rate plus most fees into a single annual percentage. A loan with a lower interest rate but a high annual fee can end up more expensive in total. Always check:

Upfront establishment fee (often $0, but some lenders charge $300 to $600)
Ongoing monthly or annual fee
Redraw or offset account fees
Discharge fee payable when you eventually close the loan

A broker with access to 50+ lenders can run a genuine full comparison of each loan on total cost, not just the headline rate. This is time-consuming to do yourself accurately, and banks have no incentive to show you their competitors’ products.

Step 4 Calculate Your Break Even Point

Switching lenders costs money upfront. The break even point is the number of months until your accumulated monthly savings equal the total switching cost. After that point, every month is pure saving.

The formula is straightforward:

Break even months = Total switching cost ÷ Monthly saving

For example:

Current rate: 7.00% on $600,000 outstanding with 25 years remaining
New rate: 6.20%
Monthly saving: approximately $298
Discharge fee: $350, new loan setup: $500, total switching cost: $850
Break even: $850 ÷ $298 = 2.9 months

After 2.9 months, you are ahead. Total interest saved over the remaining 25 years is approximately $89,000, even after switching costs.

Use our free refinance savings calculator to enter your exact figures and see your monthly saving, annual saving, total interest saved, and break even timeline.

When cashback changes the equation

Many lenders offer cashback incentives for refinancers, typically $2,000 to $4,000. When cashback equals or exceeds your total switching cost, your break even point is immediate, meaning you are in front from day one. However, cashback offers typically require you to keep the loan for a minimum period (usually two years) or repay the cashback if you switch again. Factor this into the comparison.

Step 5 Apply With Your New Lender

Once you have identified the loan and confirmed the numbers make sense, it is time to apply. Most lenders require the following documents:

Documents you will need

Last two payslips (or last two years’ tax returns if you are self employed)
Last three months’ bank statements showing salary credits and living expenses
Statement of your existing home loan showing current balance and repayment history
Evidence of property ownership (council rates notice or title search)
Most recent mortgage repayment receipts or statements
Photo ID (passport or driver’s licence)
Details of any other assets (savings, investments, vehicles)
Details of any other liabilities (car loans, credit cards, personal loans)

What happens during assessment

The new lender will assess your application against their current lending criteria: income, expenses, existing debts, property value, and LVR. They will conduct a credit check (one enquiry on your credit file) and usually order a property valuation. The credit check will cause a small, temporary dip in your credit score.

Assessment typically takes 3–10 business days for a straightforward refinance at most lenders. Complex applications (borrowers who are self employed, multiple properties, or unusual income structures) can take longer.

If you apply through a broker, the broker prepares the application on your behalf, selects the lender most likely to approve at the best rate based on your profile, and liaises with the lender throughout assessment. You typically submit documents once rather than multiple times to multiple lenders.

Step 6 Settlement and Discharge

Once your application is approved, the new lender issues a formal approval (unconditional letter of offer). You sign the loan documentation and the settlement process begins.

How the handover works

You sign the new loan documents and return them to the new lender
The new lender contacts your current lender to arrange discharge of the existing loan
Your current lender prepares a discharge authority and calculates the payout figure
Settlement is booked. Your conveyancer or the lenders’ settlement teams coordinate a settlement date
On settlement day, the new lender pays out the old loan in full. The mortgage is discharged from your current lender and registered with the new lender
Your first repayment to the new lender is typically due 30 days after settlement

The full process from application approval to settlement typically takes 2–4 weeks. There is no simultaneous property transaction to coordinate (unlike a purchase), which makes refinancing materially simpler than buying. Most borrowers describe the process as less stressful than expected.

If you are using an offset account on the current loan, ensure you transfer any offset balance before settlement, as it will not automatically transfer to the new lender.

Discharge Fees and Break Costs: What to Watch Out For

The costs of refinancing are generally modest for variable rate borrowers but can be substantial for those exiting a fixed rate loan.

Cost	Typical Amount	Notes
Discharge fee	$150 to $500	Charged by your current lender to close the loan and release the mortgage. Most lenders charge this regardless of loan type.
Application / setup fee	$0 to $600	Some new lenders charge an establishment fee. Many competitive lenders charge nothing. Check the PDS.
Legal / settlement	$200 to $400	Some lenders include this in their fee structure. Clarify with your broker.
Fixed rate break cost	$0 to $50,000 or more	Only on fixed loans exited before the fixed period ends. Can be very large. See below.
Cashback (offset)	Up to $4,000+	Many lenders offer cashback to refinancers. Deducted from your net switching cost.

Fixed Rate Break Costs: The Most Important Number to Get Right

If you are on a fixed rate home loan and want to refinance before the fixed period ends, your lender can charge a break cost (also called an economic cost or early repayment fee). This is not a standard penalty. It is a calculation based on the difference between your contracted fixed rate and current wholesale funding rates for the remaining fixed term, applied to your outstanding balance.

If rates have fallen significantly since you fixed, the break cost can be tens of thousands of dollars. If rates have risen since you fixed, the break cost may be zero or close to it.

Always contact your current lender and request an exact break cost figure before signing anything with a new lender. Break costs must be disclosed on request under the National Consumer Credit Protection Act. Do not estimate this number — get it in writing.

In many cases, it is worth waiting until the fixed period ends before refinancing. If the fixed period ends in 6 months, the break cost of exiting now needs to be compared against 6 months of the higher rate versus the lower rate. The break cost would need to be lower than 6 months of rate differential savings to make early exit worthwhile. A broker can model this for you precisely.

How a Mortgage Broker Makes Refinancing Easier

Most Australians who refinance do so through a mortgage broker, and for good reason. Refinancing involves comparing dozens of products, negotiating with lenders, assembling documents, managing the assessment process, and coordinating settlement. A broker handles all of this.

What a broker does that you cannot easily do yourself

Access to 50+ lenders — Banks only show you their own products. A broker with a full panel can compare major banks, specialist lenders, and boutique institutions simultaneously
Negotiation — Brokers submit volume to lenders and have negotiating leverage to access rates not publicly advertised
Credit file management — Multiple direct applications to multiple lenders each create a credit enquiry. A broker identifies the right lender first and typically submits one application
Application quality — A poorly presented application gets declined or results in a worse rate. A broker packages your application to meet the lender’s criteria
Paperwork coordination — The broker liaises between the new lender, your current lender, and settlement teams. You sign where instructed
Free to you — Mortgage brokers are paid by the lender at settlement. There is no charge to the borrower for a standard refinance

Stanford Financial’s refinancing service

Stanford Financial is a Springfield Central brokerage with multiple industry awards and access to over 50 lenders. Our Lending Director, Steven Beach, reviews every refinancing scenario personally. We serve Brisbane, Ipswich, Logan, Gold Coast and clients across Australia.

We start every refinance assessment the same way: a free home loan health check that compares your current loan against the market, tells you what rate you should be paying, and shows you the exact numbers before you commit to anything.

No obligation, no fee, no impact on your credit file until you decide to proceed
MFAA Diversified Business and Newcomer Award 2022
Access to major banks, specialist lenders, and boutique institutions
Refinancing completed remotely for borrowers across Australia

Frequently Asked Questions

How often can I refinance my home loan?

There is no legal limit on how often you can refinance. Practically, refinancing too frequently can affect your credit score, reset cashback clawback periods, and incur repeated switching costs. Most financial professionals suggest reviewing your loan every 2 to 3 years. If your rate is materially uncompetitive, reviewing sooner is worth it regardless of when you last refinanced.

Will refinancing affect my credit score?

Yes, briefly. When you apply for a new home loan, the new lender performs a credit enquiry, which appears on your credit report and typically reduces your score by a small amount for a short period. A broker typically submits one application to the most suitable lender based on your profile, which is more efficient than applying to multiple lenders directly.

Do I need a new property valuation to refinance?

Most lenders require a property valuation as part of the refinancing process. This is typically arranged and paid for by the new lender at no cost to you, or included in the application fee. The valuation determines your current LVR, which affects the rate you are offered and whether LMI applies. In some cases, lenders accept an automated valuation rather than a full physical inspection, which speeds up the process.

Can I refinance if I have less than 20% equity?

Yes, but LMI may apply if your LVR is above 80%. This adds a cost to refinancing that may erode or eliminate the benefit of the lower rate. Use our LMI calculator to check the LMI cost at your current property value and loan balance before proceeding. Some lenders offer cashback that can offset LMI costs in specific scenarios.

How long does refinancing take?

Refinancing typically takes 2 to 6 weeks from application to settlement. The main variables are the speed of the new lender’s credit assessment, valuation turnaround, and coordination with your existing lender for discharge. Refinancing is materially simpler than a new purchase as there is no contract deadline, no conveyancer managing a settlement workspace, and no simultaneous sale to coordinate. Your broker manages the process on your behalf.

Can refinancing help me access equity?

Yes. If your property has increased in value since you purchased, or you have paid down a significant amount of principal, you may have equity you can access by refinancing to a higher loan amount. Common uses include home renovations, investment property deposits, and debt consolidation. The funds are typically paid into your nominated account at settlement. See our refinancing loans page for more detail on equity access.

Book a Free Home Loan Health Check

If you have not reviewed your home loan in the last two years, you owe it to yourself to find out what you are actually paying versus what you could be paying. A 0.5% rate difference on a $600,000 loan saves approximately $160,000 over 25 years. That is not rounding error. That is material.

A free home loan health check with Stanford Financial takes 15 minutes and gives you a clear answer: is your current loan competitive, and if not, what is a better option worth to you in real dollars? There is no obligation to proceed and no credit file impact unless you choose to apply.

Call 0483 980 002 or book your free assessment online. We typically respond within one business day.

Reviewed and Verified

All content published on this website has been reviewed and verified by Steven Beach, Lending Director at Stanford Financial. With over 20 years of experience in finance and lending, Steve ensures that every article, guide, and resource accurately reflects current lending practices, lender policies, and the real-world outcomes he sees working with Australian borrowers every day. His hands-on experience across home loans, investment lending, and specialist finance means the information you read here is grounded in genuine industry expertise – not just theory.