Australia’s mortgage market is intensely competitive — and lenders consistently offer their best rates to attract new customers rather than reward loyal existing ones. If you’ve had your home loan for more than 2–3 years and haven’t reviewed it, there’s a good chance you’re paying more than necessary. Refinancing could save you significantly — here’s what you need to know.
Why Refinancing Makes Sense Now
Lenders routinely offer rates 0.5%–1.5% lower to new customers than the rates existing customers are paying. This practice — sometimes called a “loyalty tax” — means homeowners who stay put pay a premium simply for their inaction. Meanwhile, the mortgage market has changed significantly in recent years, with more competitive non-bank lenders offering excellent products that didn’t exist when you first got your loan.
What Can You Achieve by Refinancing?
Lower interest rate — The most obvious benefit. Even a 0.5% reduction saves approximately $3,000/year on a $600,000 loan — $75,000+ over 25 years.
Better loan features — Access a proper offset account, unlimited extra repayments, or a redraw facility your current loan doesn’t offer.
Access your equity — If your property has grown in value, refinancing gives you access to that equity as a deposit on an investment property, for renovations, or for other purposes.
Consolidate debt — Roll high-interest personal debt into your lower-rate mortgage, reducing your total monthly commitments.
Switch loan type — Move from variable to fixed (or vice versa), or switch from P&I to IO (or vice versa) as your circumstances change.
When Does Refinancing Make Financial Sense?
Refinancing has costs — application fees, valuation fees, discharge fees from your current lender, and potentially break costs (for fixed rate loans). To determine if refinancing makes sense, you need to compare the annual savings against the upfront costs and calculate the break-even timeline.
As a rough rule of thumb: if you’re saving 0.4% or more on your rate and plan to hold the loan for at least another 2–3 years, refinancing is almost always worth it once you factor in the costs.
The Refinancing Process
The process is simpler than many borrowers expect. A broker compares your options across multiple lenders, recommends the best fit, and manages the application from start to finish. You’ll need to provide updated income documentation, recent bank statements, and details of your existing loan and debts. The new lender pays out the old one directly at settlement — typically 4–6 weeks from application.
Cashback Offers: Too Good to Be True?
Many lenders offer cashback incentives ($2,000–$5,000) to attract refinancers. These can be genuine value — but not if the cashback is offset by a higher rate or poor loan features. Always evaluate the total cost of the loan over your expected holding period, not just the upfront cashback.
Free Refinance Health Check
At Assembly Finance, we offer a free home loan health check for existing borrowers. We’ll review your current rate and loan structure, compare it against the market, and tell you honestly whether refinancing makes sense — and if so, by how much you’d save. Contact James today for your free health check.
