If you are a few years into your mortgage and wondering whether you could get a better deal, it may be time to review it. The same applies if your fixed rate is about to end. Understanding how to refinance a home loan is usually simpler than people expect.
This guide explains how to refinance a home loan step by step, including what to check, what it can cost, how long it can take, and what happens at settlement. For Sydney homeowners, much of the work can be handled once the right lender is found.
Key Takeaways
- Refinancing means replacing your current home loan with a new one, either with a different lender or by renegotiating with your own, usually to get a lower rate, better features, or access to your equity.
The process has seven steps: set your goal, check your equity and borrowing position, ask your current lender to reprice, compare loans, apply, complete the valuation and approval, and settle. Most refinances take two to five weeks from application to settlement.
Expect a discharge fee from your current lender, government mortgage registration and discharge charges, and possibly application, valuation, and settlement fees with the new lender. Break costs apply only if you leave a fixed rate early, and Lenders Mortgage Insurance may apply where you borrow more than 80% of the property’s value
Lenders assess the same borrower differently. If your bank says no, or you cannot pass the standard serviceability test, some lenders apply a smaller buffer to like-for-like refinances.
A mortgage broker compares lenders for you, lodges one application instead of several, and handles the discharge and settlement paperwork, at no cost to you.
What Refinancing Actually Means
Refinancing means replacing your existing home loan with a new one, either with your current lender or a different lender. The aim is usually to get a better interest rate, change the loan features, alter the loan structure, or access equity in your property.
Staying with your existing lender is often handled as a reprice or loan variation. Switching lenders is a full refinance, which usually involves a new application, valuation, approval, and settlement.
There is also an important difference between a straight refinance and accessing additional funds. A straight refinance mainly replaces the existing debt, while equity release vs refinancing becomes relevant when you want to increase the loan and access some of the equity you have built up in the property.
Why and When Homeowners Refinance
Homeowners refinance for different reasons, and the right time depends on what you are trying to achieve.
- A lower rate: Your current loan may no longer be competitive.
- A fixed rate is ending: This is a good time to compare what your lender will move you onto against other options.
- Better features: You may now want an offset account, redraw, or a different repayment structure.
- Accessing equity: Refinancing can allow you to fund a renovation or use equity to buy another property without selling your existing home.
- Consolidating higher-interest debt: Refinancing can sometimes simplify several debts into one repayment.
- Changing the loan term: You may want to shorten the loan or restructure repayments.
- Changing lenders: Service, policy, or flexibility may simply no longer suit you.
You can refinance at almost any point, although lenders will usually want to see a reasonable repayment history. In practice, it makes sense to review your home loan at least once a year, and sooner if rates move, your fixed term is ending, or your income, expenses, or property plans change.
How to Refinance a Home Loan in Seven Steps
The process is easier to follow when you break it into seven clear steps. The key is doing them in the right order, so you know whether refinancing improves your position before an application is submitted. The Australian Government’s Moneysmart guidance on switching home loans also recommends comparing the costs and benefits before making the move.
1. Work Out What You Want From It
Step 1 is working out what you want the refinance to achieve. That might be a lower repayment, paying the loan down faster, releasing equity, or combining several debts. Your goal affects the loan, features, and lender you should consider.
Cashback alone, or one attractive advertised rate, is not enough reason to switch. The whole loan needs to stack up.
You do: Decide on the main outcome you want.
Your broker does: Turns that goal into a shortlist of suitable loan structures and lenders.
2. Check Your Equity, Credit, and Borrowing Position
Step 2 is checking your equity, credit position, and borrowing capacity before applying. Loan-to-value ratio, or LVR, is your loan amount divided by the property’s value. As an example only, a Sydney home worth $1.2 million with $800,000 owing has an LVR of about 67%.
An LVR of 80% or below can help avoid Lenders Mortgage Insurance. The lender also assesses serviceability and credit history, while understanding how much equity you need to refinance helps you work out whether the move is realistic before applying.
You do: Provide your loan balance and estimated property value.
Your broker does: Runs the numbers against lender policy before anything is lodged.
3. Ask Your Current Lender for a Better Deal First
Step 3 is asking your current lender for a better deal before switching. Repricing can be simpler because you may avoid many costs and much of the paperwork involved in moving lenders.
Ask what rate the bank is offering comparable new customers and whether it can improve your pricing. A lender may move when there is a genuine competing option. Sometimes it cannot, particularly if you no longer fit its policy or the product you are on is being phased out.
You do: Tell the lender you are reviewing the loan.
Your broker does: Gives you a genuine competing option to compare against the repriced offer.
4. Compare Loans Properly
Step 4 is comparing loans properly, not just comparing the headline interest rate. Look at the comparison rate, ongoing fees, offset or redraw features, repayment flexibility, and the likely time you will keep the loan.
Cashback can look attractive upfront, but home loan cashback offers still need to be weighed against the interest rate, ongoing costs, and any clawback conditions.
Lender policy matters too. Serviceability rules, living-expense assumptions, income treatment, and credit card limits can differ.
You do: Explain what matters most to you.
Your broker does: Matches your situation to lenders whose policy fits it.
5. Apply
Step 5 is submitting the application once the preferred option is chosen. You will usually need photo identification, recent payslips or tax returns, current loan and bank statements, and a summary of living expenses.
Avoid applying to several lenders at once. Each formal application can create a credit enquiry, so a targeted application is generally cleaner. The process can also look different when refinancing while you are self-employed, because lenders may assess business income and financials in different ways.
You do: Send the requested documents once.
Your broker does: Packages and lodges the application in the format the chosen lender expects.
6. Valuation and Approval
Step 6 is the property valuation and formal approval. Some lenders use an automated or desktop valuation, while others require a full inspection.
If the valuation is lower than expected, the refinance does not automatically fail. You may obtain another valuation through a different lender, proceed at a higher LVR, or stay with your current lender and reprice. A higher LVR can also bring Lenders Mortgage Insurance into play.
You do: Make the property available if an inspection is required.
Your broker does: Reviews a low valuation, challenges it where appropriate, and changes lender strategy if needed.
7. Settlement, and What Happens After
Step 7 is settlement, where the old loan is paid out and the new loan takes its place. A discharge authority goes to your current lender, which provides the payout figure. The new lender pays out the old loan and the mortgage changes hands electronically through PEXA.
After settlement, check the first repayment date, offset balance, direct debits, and redraw setup. Then schedule a yearly rate review.
You do: Update direct debits and check the new account.
Your broker does: Chases the discharge, coordinates settlement, and reviews the loan later.
If you want someone to manage that process from comparison through to settlement, a refinance mortgage broker in Sydney can handle much of it for you.
What Refinancing Costs
Refinancing is not free, but the relevant costs are usually easy to identify before you decide whether to proceed.
Fee | Who Charges It | When it Applies |
Discharge Fee | Your current lender | Usually when the old loan is closed |
Mortgage discharge and registration fees | NSW Land Registry Services | When the old mortgage is discharged and the new mortgage is registered |
Application or establishment fee | New lender | May apply, although it is often waived |
Valuation fee | New lender | Sometimes, depending on the valuation required |
Settlement fee | New lender | Sometimes, depending on the valuation required |
Lenders Mortgage Insurance | New lender | Generally when the new loan is above 80% |
Break costs | Current lender | Only when leaving a fixed rate before the fixed term ends |
Your broker can confirm the exact costs for your loan before anything is lodged. For borrowers on a fixed rate, using a break cost calculator can also help show whether leaving the fixed period early is likely to affect the overall benefit.
The break-even test is simple. Divide the total switching cost by the expected monthly savings. The result is roughly how many months it takes for the savings to recover the cost of switching. That is more useful than relying on a generic rule of thumb.
Refinancing While You Are on a Fixed Rate
You can refinance during a fixed-rate period, but a break cost may apply. In simple terms, the lender may charge because you are leaving the fixed term early.
Break costs can be higher when market rates have fallen since you fixed and there is still a long time left. They usually reduce as expiry approaches.
Paying a break cost can still make sense if the overall benefit is strong enough. In other cases, waiting is smarter. If you are considering whether to refinance a fixed-rate home loan early, the cost of leaving needs to be weighed against the benefit of moving.
When the fixed term ends, the loan usually rolls onto a variable rate, which may not be the lender’s best rate. That is why the three months before expiry is a good time to start reviewing your options.
Stuck on a High Rate? What Mortgage Prison Means
Mortgage prison is the situation where you want to move to a better home loan but cannot pass the new lender’s serviceability test, leaving you stuck with your existing lender.
Under APRA’s current macroprudential settings, banks are generally required to assess new home loan borrowers using a serviceability buffer of at least 3 percentage points above the loan’s interest rate.
However, APRA allows lenders to make exceptions to their standard serviceability policy in certain circumstances. This can include some like-for-like refinances, where a borrower is simply replacing an existing home loan rather than materially increasing their debt.
Whether an exception is available depends on the lender’s current credit policy and the borrower’s circumstances. A mortgage broker can compare lender policies and identify whether there may be another refinancing option before assuming you are stuck with your current bank.
Refinancing Mistakes to Avoid
- Resetting the clock: Moving back to a fresh 30-year term can reduce repayments but keep you in debt longer if you do not keep paying it down.
- Refinancing too often: Repeated switching can lose its benefit when discharge, setup, and settlement costs keep adding up.
- Consolidating debt without changing habits: Rolling credit cards into the mortgage only helps if the card balances do not build up again.
- Choosing cashback over the loan: A one-off payment should not outweigh the rate, fees, features, and longer-term cost.
- Applying to several lenders: Multiple applications can mean multiple credit enquiries when one targeted application may be enough.
- Ignoring switching costs: Check break costs and other fees before deciding the new rate is genuinely better.
Refinancing Through a Broker or Straight to the Bank?
Going straight to your bank can make sense if you are happy to stay and the lender is prepared to reprice your existing loan competitively. In some cases, that may be all you need.
The difference between using a mortgage broker vs a bank becomes more important when you are considering switching lenders. A broker can compare not only interest rates but lender policy, borrowing capacity, features, and fees before submitting one targeted application.
AFMS Group is Sydney based and has access to more than 30 lenders. In most standard residential lending situations, the broker is paid by the lender rather than charging you a broker fee.
If refinancing is the better option, a refinance mortgage broker in Sydney can also coordinate the valuation, discharge, approval, and settlement process.
Frequently Asked Questions
When Can You Refinance a Home Loan?
You can refinance a home loan at almost any time. In practice, lenders usually want to see a reasonable repayment history, and refinancing very soon after taking out a loan can limit your options. If you are still inside a fixed-rate period, break costs may also apply, so timing should form part of the overall comparison.
How Long Does It Take to Refinance a Home Loan?
A refinance commonly takes around two to five weeks from application to settlement. The timing depends on the new lender’s assessment queue, how quickly the property valuation is completed, and how fast the outgoing lender processes the discharge. Having documents ready and choosing the right lender from the start can help avoid unnecessary delays.
How Much Does It Cost to Refinance a $300,000 Mortgage?
There is no single fixed cost for refinancing a $300,000 mortgage. The costs can include a discharge fee, mortgage registration and discharge charges, and sometimes application, valuation, or settlement fees. Lenders Mortgage Insurance generally does not apply if the new LVR is 80% or below, while break costs only apply if you leave a fixed rate early.
Can I Refinance With the Same Bank?
Yes, you can refinance with the same bank. In many cases, the first step is simply asking the lender to reprice your existing loan or move you to a more suitable product. If the repriced offer is still not competitive, or the features and policy no longer suit you, it may be worth comparing other lenders.
Does Refinancing Affect My Credit Score?
Yes, refinancing can affect your credit score slightly because a formal home loan application creates a credit enquiry. One well-targeted application will usually have less impact than applying to several lenders at the same time. This is one reason to compare policies and likely approval options before deciding where to lodge.
Can I Refinance With Bad Credit?
Yes, refinancing with bad credit can still be possible, depending on what is recorded on your credit file, how serious it was, and how long ago it occurred. Because lender policies differ significantly, understanding the options for refinancing with bad credit before lodging an application can help avoid approaching the wrong lender.
Ready to Refinance? Talk to a Sydney Refinance Broker
A good refinance should give you a clear picture of the benefit before you commit. That means understanding the new rate and features, switching costs, lender policy, and how long it may take to recover those costs.
If you would like the process handled for you, speak with a refinance mortgage broker in Sydney by calling 1300 659 756, or book a consultation with AFMS Group.
This article provides general information only and does not constitute financial or credit advice. This article provides general information only and does not take into account your objectives, financial situation, or needs. Consider whether it is appropriate before acting.