Refinancing a Home Loan: 8 Checks Before You Switch

1. Refinancing a Home Loan? Review Your Current Loan First

Before refinancing a home loan, start by reviewing the mortgage you already have. The aim is not simply to find something different but to identify what you want a new loan to improve.

Are you trying to lower your repayments? Do you want a more competitive rate? Are you looking to consolidate debt, access equity for renovations or investment, or gain features such as an offset account, redraw facility or greater repayment flexibility?

Take note of your current interest rate, remaining loan balance, remaining term, repayment amount, annual or package fees and the features you actually use. This creates a useful baseline when you compare other options.

It can also be worthwhile reviewing the market from time to time. Checking what other home loan options are available and considering whether switching could save you money. However, a refinance home loan should still be assessed on its total cost and suitability, not rate alone.

Before you start comparing products, define what a successful refinance needs to achieve. Having a measurable goal makes it easier to judge whether switching will genuinely leave you in a stronger position.

2. Check Whether Your Current Lender Can Offer a Better Deal

Before moving to another lender, ask your existing lender whether they can improve your current rate or offer a more suitable product. Speak with your current lender before switching because the lender may be willing to reduce your interest rate or offer another deal to retain your business.

This can be worthwhile because staying with your existing lender may avoid some of the costs and paperwork associated with changing lenders. However, you should not assume that a retention offer is automatically the best option.

Compare any offer from your current lender with the home loan refinancing rates, fees, loan features and repayment structures available elsewhere. A small rate reduction may look appealing, but another product could still provide better overall value depending on your needs.

The important question is not simply, “Will my lender reduce my rate?” It is, “How does their revised offer compare with the alternatives available to me?”

This is where having clear refinancing goals can help. If your current lender can meet those goals at an appropriate cost, staying may be worth considering. If not, it may be time to compare other lenders.

3. Check the True Cost of Refinancing a Home Loan

The cost of refinancing a home loan can include several upfront and ongoing expenses. Depending on your circumstances and the lenders involved, these may include discharge fees, fixed-rate break costs, application or establishment fees, valuation costs, settlement-related charges, switching fees and ongoing package or account fees.

Individually, refinancing home loan fees may seem manageable. Together, however, they can reduce the financial benefit of moving to a lower rate. Borrowers should consider expenses such as fixed-rate break fees, discharge fees, application fees and other switching charges before changing loans.

For example, if changing loans costs $1,500 and the new loan reduces your repayments by $250 per month, the simple break-even period would be about six months. This is only an illustrative calculation and does not account for every possible cost or change in interest, but it shows why borrowers should look beyond the headline rate.

Another important question is how long you expect to keep the new loan. If it takes two years to recover your switching costs but you expect to sell the property in 12 months, the refinance may deliver less benefit than expected.

A mortgage switching calculator can help you estimate whether switching may save money and how long it could take to recover the cost of moving loans.

If you are currently on a fixed-rate loan, check whether a break cost applies before making a decision. Your existing lender can confirm the charges that apply to your particular loan.

4. Compare Home Loan Refinancing Rates, Fees and Features

One of the biggest mistakes people can make when refinancing a home loan is focusing only on the interest rate. A lower rate matters, but it should be considered alongside the fees, loan term, repayments and features that affect how useful the loan will be to you.

When comparing home loan refinancing rates, consider:

• the advertised interest rate
• the comparison rate
• upfront application or establishment costs
• ongoing fees
• your expected repayment amount
• the proposed loan term
• offset account options
• redraw facilities
• extra repayment options
• fixed versus variable rate options
• repayment flexibility

A comparison rate can be particularly useful because it incorporates the interest rate and certain fees and charges into a single percentage, although it will not necessarily reflect every cost or your exact circumstances.

Reading guides on choosing a home loan can also help borrowers understand what to compare when assessing different products. Some borrowers value a straightforward, low-cost loan. Others may benefit more from features that support the way they manage cash flow or make additional repayments.

For example, access to an offset account may be important to someone who regularly holds cash savings, while another borrower may simply want a basic variable loan with minimal fees.

A slightly higher rate with useful features can sometimes suit a borrower better than the cheapest advertised option. The goal is to compare like with like and consider how each option is likely to work over the period you expect to keep the loan.

5. Check Your Equity, Property Value and LVR

Your equity position can have a significant impact on your refinancing options.

Equity is broadly the difference between the value of your property and the amount you still owe on it. When considering a refinance, lenders will also look at your loan-to-value ratio, commonly known as your LVR.

A simple way to calculate LVR is:

Loan balance ÷ property value × 100 = LVR

For example, if your property is valued at $800,000 and your outstanding loan balance is $560,000, your LVR would be 70%.

Having at least 20% equity can put a borrower in a stronger negotiating position when looking to switch. If you have less than 20% equity, lender’s mortgage insurance may apply in some circumstances, which can increase the cost of refinancing a home loan and potentially reduce the benefit of securing a lower rate.

Property values can also change over time.

If your home has increased in value while you have reduced your loan balance, your LVR may have improved since your original mortgage was approved. On the other hand, if the valuation obtained by the new lender is lower than expected, your LVR could be higher.

That may affect the rates or products available to you, the amount you can borrow or whether additional costs apply.

Before refinancing a home loan, it can therefore be useful to understand your estimated property value, current loan balance and likely LVR. A mortgage broker can help you explore how different lenders may approach your equity position.

6. Check Your Borrowing Power Before You Apply

Refinancing generally involves a new credit assessment.

Even if you have been comfortably making repayments on your existing mortgage, a new lender will normally assess whether you meet its current lending criteria.

Factors a lender may take into consideration include your:

• income
• employment
• regular living expenses
• credit cards
• personal loans
• car finance
• other mortgages
• dependants
• existing financial commitments
• credit history
• property value

Your borrowing position may also have changed since you first obtained your mortgage. A higher income or lower debt could strengthen your position, while additional liabilities, increased expenses or changes in employment could affect the amount a lender is willing to offer.

Banks also assess whether borrowers could continue meeting repayments if interest rates were higher. As of May 2026, the Australian Prudential Regulation Authority maintained its mortgage serviceability buffer at 3 percentage points. This is a prudential requirement applying to regulated banks and forms part of how repayment capacity is assessed. Your credit history is another consideration.

When you apply for credit, a lender may request your credit report as part of assessing your creditworthiness, and the request can be recorded as a credit enquiry. The Office of the Australian Information Commissioner provides more detail about credit enquiries and the information contained in your credit report.

Rather than submitting applications to multiple lenders without a clear strategy, it can be sensible to understand which lenders and products are more likely to suit your circumstances first.

A mortgage broker can help narrow the field, assess your position and explain the information a lender is likely to require.

7. Check the New Loan Term and Total Interest Cost

A lower monthly repayment does not always mean a lower overall cost.

For example, imagine you have 18 years remaining on your existing mortgage and move to a new 30-year loan. Your new monthly repayment may be lower partly because the debt is being spread across a much longer period.

However, keeping the debt for those additional years could increase the total amount of interest you pay.

Also, always check the length of a new loan. This is because extending the loan term may mean paying interest for longer. Consider a new term similar to the time remaining on your existing mortgage where appropriate.

When assessing a refinance, compare:

• the years remaining on your current mortgage
• the proposed term of the new loan
• the new repayment amount
• the expected total interest over the loan
• the upfront and ongoing fees
• whether you intend to make additional repayments

This is especially important when assessing mortgage refinancing primarily to achieve repayment relief.

If the repayment falls by $300 per month but you add many years to your mortgage, the immediate cash flow improvement needs to be considered alongside the potential longer-term cost.

If the new rate is lower and your budget allows it, maintaining higher repayments rather than reducing them may help you repay the loan sooner. Keeping repayments at the same level after moving to a lower rate can help reduce a mortgage faster.

The right approach depends on your circumstances, priorities and financial goals.

8. Seek Professional Advice Before Refinancing a Home Loan

Before refinancing a home loan, it can be helpful to speak with a mortgage broker who can compare suitable lenders and explain eligibility requirements, fees and loan structures.

A local mortgage broker can review your current position, discuss what you want the refinance to achieve and compare lending options available through their lender panel.

This may include examining the interest rate, comparison rate, refinancing home loan fees, features, lending requirements, proposed term and expected repayments.

Mortgage brokers must act in the customer’s best interests when suggesting a home loan. It also recommends asking your broker to explain how each recommended loan works, what it costs and why it is considered to be in your best interests. 

If your goal is to access equity, restructure repayments or secure a more suitable loan, professional support can also help you understand the practical steps involved before an application is lodged.

Instead of researching lender after lender and trying to interpret different lending policies yourself, a broker can help you identify options that align with your circumstances and explain the advantages and trade-offs involved.

Is Refinancing a Home Loan Worth It for You?

Refinancing a home loan can make sense when the overall outcome improves your position, not simply because another lender is advertising a lower rate.

Refinancing could be worth considering if you:

• want to secure a more competitive interest rate and potentially reduce repayments
• want to consolidate eligible debts into a more manageable structure
• are looking to access available home equity for renovations, investment or other approved purposes
• feel restricted by your current loan and want more useful features
• expect to keep the new loan long enough to recover the switching costs
• are approaching the end of a fixed-rate period and want to compare your next options
• have reviewed the total cost and are comfortable that the benefits justify the change

The right decision depends on your loan balance, equity, income, expenses, refinancing costs, loan term and goals.

This is why comparing the complete loan rather than a single interest rate is so important.

A lower rate might save you money, but the result could be less attractive if the new loan has large upfront fees, expensive ongoing charges or a much longer repayment term.

Likewise, a loan with slightly higher home loan refinancing rates may provide features that offer greater value to you over time.

The question is ultimately whether the new lending structure leaves you better positioned to achieve your financial goals.

Time to Rethink Your Home Loan?

A successful home loan refinance should improve your financial position rather than simply move your debt from one lender to another.

Review your current mortgage, understand the cost of switching, compare rates and features, check your equity and borrowing position, and make sure the new loan term supports your goals.

At Professional Lending Solutions, we can help you compare your current mortgage with suitable refinancing options and understand the rates, fees, features and lending requirements involved.

Whether your goal is to reduce repayments, restructure your loan or access available equity, our team can guide you through the process and help you understand your options before you make the switch.