Written by

Steven Lee

Mortgage Director, ODIN Mortgage & Tax

10+ years in Australian banking and mortgage lending

Last reviewed

Updated on: June 10, 2026 View profile →

Will Refinancing Save Me Money?

If you’re like most Aussies, your mortgage is your biggest expense — and the question is, are you paying more than you should?

With interest rates and property values constantly shifting, many homeowners are taking a second look at their loans. In fact, refinancing activity has surged 8.4% year-on-year in early 2025, according to PEXA. That’s a clear sign more Australians are chasing better deals and freeing up cash each month.

This guide breaks down how refinancing works, when it makes sense, and how much you could actually save — so you can decide whether it’s time to make your money work harder for you.

Why Consider Refinancing Your Home Loan?

Australian homeowners and overseas expats consider refinancing for reasons beyond a lower interest rate—value, flexibility, features, and more.

You may also want to consolidate other debts or use your home’s growing value for extra cash to use elsewhere.

Below are some of the most common reasons to explore refinancing. Understanding them can help you see if refinancing aligns with your financial goals.

Securing a Better Interest Rate: This is a primary aim for most. It helps lower monthly payments and total interest.
Accessing Different Loan Features: You may want features like offset accounts or redraw facilities. Flexible repayment options are also popular.
Consolidating Debt: Refinancing can combine expensive debts like credit cards into your mortgage. This can lower overall interest paid and simplify your repayments.
Accessing Home Equity: As property values rise, so does your equity. Refinancing can unlock this equity for renovations or investments.
Switching Loan Types: You may want to change between fixed and variable rates. This helps match your loan to current finances or market views.
Dissatisfaction with Current Lender: Poor service can make you seek a new lender. Lack of suitable products is another reason.

Considering these points can help answer how refinancing can save you money. It’s about finding a loan offering more than a low rate, one that enhances your overall financial situation.

👉 Check out:

How Can Refinancing Save You Money?

A lower interest rate is the most direct way refinancing can save you money. Better home loan features can also greatly reduce the overall amount you pay.

Often, combining these methods yields the best results as each plays a part in your overall savings. Understanding them is vital to see how you save money.

1. Securing a Lower Interest Rate

Getting a lower interest rate directly cuts your costs. It reduces interest charges, meaning you pay less interest over the loan’s life.

Even a small rate drop, like 0.5%, saves thousands over many years. You may get a lower rate if market rates have fallen since your loan started.

An improved financial situation or more equity can also help you qualify. If your fixed-rate period is ending, you may revert to a higher variable rate, making it a good time to compare.

Your monthly repayments can also decrease, allowing you more flexibility.

👉 Try our Mortgage Repayment Calculator to see how much you can save with different interest rates.

2. Reducing or Eliminating Loan Fees

Your new loan may have lower ongoing fees. This can include monthly account-keeping or annual package fees.

While refinancing has its own costs, the new loan’s fee structure could be more favourable. Some lenders may even waive application fees to attract you.

Always compare the entire cost structure, not just the interest rate. This includes any potential stamp duty fees. The comparison rate helps by including most standard fees. This helps determine if a refinance will save you money in terms of fees.

3. Accessing Beneficial Loan Features

Accessing loan features like offset accounts or redraw facilities through refinancing can greatly reduce the interest you pay.

An offset account is a savings account linked to your loan. The balance offsets your loan principal for interest calculation.

Suppose your loan is for $400,000, and you put $50,000 into your offset account. Interest would then be charged only on $350,000. Funds remain accessible.

On the other hand, a redraw facility lets you access extra repayments made on your loan. These extra payments directly lower your loan balance and the interest charged.

Refinancing to a mortgage with features like these can help save you money.

👉 Check out what other Home Loan Features are available.

4. Shortening the Loan Term

Refinancing can allow you to choose a shorter loan term. For instance, you could switch from a 30-year to a 20-year loan.

This usually means higher monthly repayments. However, the total interest paid over the loan’s life can be much lower.

This strategy helps you become mortgage-free sooner. It also builds your equity faster. This is a key way refinancing saves you money in the long run.

5. Consolidating Debts at a Lower Rate

You can use refinancing to combine higher-interest debts. This includes credit card balances or personal loans.

Mortgage rates are usually lower than unsecured debt rates. You can reduce your overall interest costs and simplify your debts into a single repayment.

Discipline is important here. Adding consumer debt to your mortgage increases the total mortgage balance. It can extend your repayment period if you don’t increase your mortgage payments.

👉 For details, see: Refinancing Home Loan to Consolidate Debt in Australia

Combining these strategies often leads to the greatest savings. For example, a lower rate plus an offset account can significantly speed up your mortgage exit. This changes the question from “Will refinancing save me money?” to “How can I strategically refinance to maximise my savings?”

AU Expats—Is Refinancing Your Mortgage Worth It?

What Are the Potential Costs and Risks of Refinancing?

Refinancing can save you money, but it has costs and risks. Several fees may apply, your credit score may be impacted, and you could pay more overall.

You need to understand these to make a good decision. These risks and fees can reduce your savings from a lower rate.

Breakdown of Potential Fees

Switching loans involves several potential fees. These can impact whether refinancing your home loan will save money.

Below is a table with the main types of costs and their typical range when refinancing.

Type of Cost	Description	Typical Range
Exit / Discharge Fees	Fee from your current lender for closing the existing loan account.	$150 – $700
Break Costs (Fixed Loans)	Penalty for repaying a fixed-rate loan before the fixed term ends. Can be large.	Varies widely, can be $1,000s
Application / Establishment Fees	Upfront fee from the new lender to set up the new loan.	$0 – $700 (some lenders waive)
Valuation Fees	Cost for the new lender to professionally value your property.	$100 – $300
Government Charges	Fees for registering the new mortgage and other state-based charges.	Varies by state (e.g., $100-$200+)
Settlement / Legal Fees	Costs for the legal process of settlement.	Varies
Ongoing Fees (New Loan)	Monthly account-keeping or annual package fees for the new loan product.	E.g., $248 p.a. for some packages

It’s crucial to know these costs. They vary significantly between lenders and loan products. Ask your current and potential new lender for a full list of applicable fees.

Risk of Extending the Loan Term

If you have 20 years left but refinance to a 30-year loan, you pay for 10 more years. Even with a lower rate, this can mean much more interest paid overall.

Extending your loan term is a common pitfall that often happens if your main goal is lower monthly payments.

We recommend negotiating a new loan term similar to your current remaining term. This ensures refinancing can save you money in total interest.

Lenders Mortgage Insurance (LMI) Implications

You usually pay LMI for mortgages over 80% LVR. So, if you refinance with less than 20% equity, you could pay a hefty amount in LMI.

Even if you paid LMI before, you may need to pay it all over again. Depending on the size, the amount could cancel out your savings from a lower rate.

LMI protects the lender if you default. It does not protect you, the borrower.

Impact on Credit Score

Every formal home loan application is a credit inquiry on your report. This includes refinancing applications.

Multiple applications to different lenders quickly can hurt your credit score. This can make it harder to get good terms or approval.

Research thoroughly before submitting formal applications. This is important when considering whether refinancing will save you money.

Introductory "Honeymoon" Rates

Some loans offer very low introductory rates for a short time, often called “honeymoon” rates. After this period, it usually goes up to a higher variable rate.

While appealing at first, the long-term loan cost depends on this revert rate. Focus on the revert rate for comparison.

👉 For more information, see: How Much Does It Cost to Refinance a Home Loan?

When Does Refinancing Make Financial Sense?

Refinancing should be strategic. Timing it with your finances and market conditions is key.

Certain trigger points often make people reassess their home loan. Knowing these helps you actively manage your mortgage to serve your best interests.

Refinancing is generally worth considering when:

Market Interest Rates Have Significantly Dropped: If rates are much lower than when you got your loan, you could get a better deal. Anticipated rate cuts can create these chances.
Your Fixed-Rate Period is Ending: Loans often revert to higher variable rates after a fixed term. This is a good time to compare offers.
Your Personal Financial Situation Improves: More income, less debt, or a better credit score can qualify you for better rates. Growing home equity above 20% (avoiding LMI) also helps. Or, you come upon a lump sum that you can use to reduce your loan amount through a cash in refinance.
You Need Different Loan Features: If your loan lacks features like an offset account or redraw, consider switching. Flexible repayments can also help manage finances better.
You Want to Access Home Equity: If you have substantial equity, a cash out refinance can fund renovations or investments. This is often cheaper than personal loans.
You Want to Consolidate High-Interest Debts: If you have costly debts like credit cards, refinancing home loan to consolidate debt can lower your overall interest. This can also simplify your finances. When asking “Can refinancing your home loan save money?”, debt consolidation is a strong yes for many.
There’s Dissatisfaction with the Current Lender: Poor service or uncompetitive products are valid reasons to switch.
Significant Time Remains on the Loan: With many years left, even a small rate cut means big savings over time.

👉 Check out When to Refinance Your Mortgage in Australia for detailed information.

When Might Refinancing Not Save You Money?

Refinancing is not the best choice in some situations. It may hurt you instead if the cost is high, you have low equity, or you’re selling the property soon.

Thinking that refinancing is too hard can stop homeowners from acting, even if beneficial. Conversely, don’t rush into it.

Refinancing may not be advisable if:

Costs Outweigh the Benefits: If total refinancing costs are more than savings over a reasonable time, it’s not financially sound. A break-even calculation is crucial here.
The Loan Balance is Small, or Only a Short Time Remains: With a low balance or few years left, savings might not cover refinancing costs.
The Interest Rate Difference is Minimal: If the new rate is only slightly better, net savings after fees could be tiny. This means the answer to “Will refinancing save me money?” may be a definitive no in this case.
The Property is Likely to Be Sold Soon: If selling within 1-2 years, you may not recoup refinancing costs.
Equity is Low (LVR is High): With less than 20% equity, you’ll likely face LMI charges again. This erodes savings.
The Current Lender Offers a Competitive Counter-Offer: Always ask your current lender first. They may offer a better rate or waive fees to keep you. While switching lenders often yields higher average savings, a good offer from your current lender can be convenient.
You’re Doing It for the Wrong Reasons: For example, you extend the loan term just for discretionary cash without seeing the higher long-term interest.

In such cases, you can consider repricing your mortgage.

The table below summarises what to consider when refinancing your home loan in Australia.

Factors to Consider	Green Light	Red Flag
Current Interest Rate	Significantly higher than current market competitive rates.	Already very competitive or only marginally higher than new offers.
Remaining Loan Term	Many years remaining, allowing savings to compound.	Only a few years remaining; savings may not cover costs.
Equity / LVR	Equity > 20% (LVR < 80%) to avoid LMI.	Equity 80%), likely incurring LMI costs.
Refinancing Costs	Low overall costs, break-even point reached quickly (e.g., within 1-2 years).	High upfront costs (e.g., large break fees, LMI), long break-even period.
Reason for Refinancing (Potential)	Clear financial benefit (e.g., lower rate, better features, necessary debt consolidation).	Unclear benefit, purely for short-term cash flow relief by extending term significantly, or chasing minor rate changes.
Market Conditions	Interest rates have fallen, or new competitive products are available.	Interest rates are stable or rising, limited competitive offers.
Credit Score	Good to excellent, qualifying for best rates.	Poor or fair, may not qualify for significantly better rates, or application could be declined.
Future Plans	Planning to stay in the property long enough to recoup costs and enjoy savings.	Planning to sell the property in the short term.

👉 Learn more here: 8 Mistakes to Avoid When Refinancing a Mortgage in Australia

Calculating Your Potential Savings: The Break-Even Point

Calculate the break-even point to truly know if refinancing will save you money. This shows how long it takes for savings to cover switching costs.

The break-even point is when total refinancing costs are offset by monthly savings. After this, real savings begin.

What is the Break-Even Point?

The break-even point marks when your refinancing investment pays off. It is the moment that accumulated savings cover all upfront costs.

Beyond this point, you start genuinely saving money. The formula is:

Months to Break Even = Total Refinancing Costs ÷ Monthly Savings

How to Calculate Your Personal Break-Even Point

Follow these steps to calculate your break-even point. This will help determine if refinance will save you money.

Calculate Total Upfront Costs: List all fees: exit fees, break costs (for fixed loans), new loan application fees, valuation fees, government charges, and legal fees.
Calculate Monthly Savings: Find the difference between your old monthly principal and interest repayment and the new, lower one.
Perform the Division: Divide Total Upfront Costs by Monthly Savings. The result is the months needed to break even.

For example:

Total Refinancing Costs: $2,500
Monthly Savings: $200
Months to Break Even: $2,500 ÷ $200 = 12.5 months

In this case, recouping refinancing costs would take over a year.

Use Online Refinance Calculators Wisely

Many lenders offer online refinance calculators. These tools estimate potential savings from refinancing.

They usually need your current loan balance, interest rate, remaining term, and property value. They show new monthly repayments and estimated savings.

Use these calculators with caution. They are estimation tools, not financial advice. Manually add your specific costs if not included. Remember, their figures are estimates. A personal break-even analysis is often more reliable.

👉 Try our Mortgage Switching Calculator to see how much you may be able to save by refinancing.

Understanding your break-even point is key to answering how much you could save by refinancing your home loan.

👉 Also see: How Many Times Can You Refinance Your Home Loan?

Pro Tips for Maximising Your Refinancing Savings

Maximising your refinancing savings involves strategic actions like negotiating, looking for holistic value, and using a mortgage broker.

Let’s check out such pro tips that will help ensure refinancing will save you money.

Negotiate, Negotiate, Negotiate

Don’t accept the first offer you receive. Always try to negotiate better terms.

Approach your current lender first. Show them competitor offers and ask them to match or beat them. They may reduce your rate or waive fees to keep you.

Negotiate with new lenders on rates and fees as well. A good credit history and over 20% equity give you more bargaining power.

Understand the Comparison Rate

The comparison rate gives a fuller view of a loan’s cost. It includes the interest rate plus most standard fees.

It’s more useful than the headline rate alone. However, it’s usually based on a standard loan amount and term, like $150,000 over 25 years.

Seek the specific comparison rate for your own loan amount and desired term. This helps clarify if refinancing will save you money.

Look Beyond Just the Interest Rate

The cheapest loan isn’t always the best one for you. Consider the value of different loan features.

Think about offset accounts, redraw facilities, and repayment flexibility. Good customer service also matters.

A slightly higher rate on a loan with great features you use (like a 100% offset) could save more overall. The lowest rate may not save you long-term if the loan structure is unsuitable.

Maintain Your Previous Repayment Level (If Possible)

If refinancing lowers your minimum monthly payment, try to keep paying the old amount. This can significantly boost your savings.

The extra amount goes straight to reducing your principal balance. This speeds up loan repayment. It can save a lot of interest over time.

This is a powerful way to save money by refinancing your home loan.

Avoid Repeated Refinancing in Short Periods

Keep an eye on mortgage rates, but don’t refinance too often. This can be counterproductive.

Each refinance has costs and involves a credit enquiry. Refinance strategically when there’s a clear and significant financial benefit.

Don’t chase very minor rate changes or make rash decisions due to service issues or any other reason.

Consider a Mortgage Broker

A good mortgage broker can access many loan products. This can save you time and find good deals.

Engage a specialist mortgage broker to tackle a complex refinancing situation or if you’re having difficulty with the process.

👉 Check out Strategic Refinancing Tips for Australia to maximise your savings.