Refinancing vs Getting a New Home Loan
Your financial goals evolve. New property opportunities arise. And suddenly you’re asking: is your current mortgage still the right one?
Refinancing and taking out a new home loan aren’t interchangeable terms — they’re two very different financial paths, with distinctive benefits, risks, and costs.
Right now, refinancing is surging. In Q1 2025, nearly 100,000 homeowners switched lenders — the highest level in 18 months. Meanwhile, the average variable home loan rate for owner-occupiers sits around 6.15% in August 2025.
In this article, we break down those paths: when refinancing might be your smarter move, when a fresh mortgage is worth the leap, and how to align your decision with your ambitions.
First, a quick look at what refinancing really is — before we map out each route ahead.
Home Loan Refinancing Overview
Refinancing means replacing your current mortgage with a new one. This new loan pays off your old loan.
The goal is usually to get more favourable terms with your current lender or a new one. If switching, it’s treated like a brand new loan application.
Key motivations include securing a lower interest rate, accessing better loan features, and accessing home equity, among others.
You should always ask your current lender for a better deal before deciding to switch.
👉 Learn How to Refinance a Home Loan in Australia the smart way.
Getting a New Home Loan When You Already Have One
If you already have a mortgage, getting a new home loan may sound confusing. This actually covers several distinct financial moves you can consider.
These scenarios differ significantly, so understanding each is vital. This should help clarify what getting a new mortgage or refinancing could mean for you.
Scenario 1: Financing a New Property
This involves taking out an additional mortgage to buy another property. It could be an investment, while you keep your current home and its mortgage.
Or, you may sell your current home and buy a new one with a new loan. Often, a cash out refinance helps you access equity in your home to cover the deposit.
The key here is the new loan is for a different property.
Scenario 2: Taking Out a Second Mortgage on Your Current Property
A second mortgage is an additional loan secured against your current property’s equity. It’s separate from your first mortgage, which stays in place.
You’ll have two mortgage payments on the same property. This is often chosen if you don’t want to or are unable to refinance the first mortgage.
Interest rates on second mortgages are typically higher due to increased lender risk. If you’re thinking about whether to get a new mortgage or refinance, this is a distinct third path.
Scenario 3: A Bridging Loan for Buying and Selling
A bridging loan is a short-term loan. It covers the financial gap when you buy a new property before selling your old one.
This and your original mortgage are usually repaid from the sale proceeds of your old home. You’ll need to manage payments on both loans for some time.
Each of these new home loan scenarios has unique purposes and financial impacts. Clearly identifying which one fits your goals is essential.
👉 Check out: How To Lower Your Mortgage Payment Without Refinancing
Refinancing vs Getting a New Home Loan
Directly compare your options when refinancing vs getting a new home loan to help your decision. Let’s start with purpose, process, and impact comparisons.
Each option serves a distinct financial objective. These objectives dictate the processes involved and their ultimate impact on your finances.
| Feature | Refinancing (Existing Property) | New Loan (New Property) | Second Mortgage (Current Property) |
|---|---|---|---|
Primary Goal & Purpose | To improve the terms of the existing loan on the current property (e.g., lower rate, better features, access equity for renovations on this property). | To acquire an additional property (investment, holiday home) or finance a replacement primary residence if relocating. | To access equity in the current property without disturbing the first mortgage, often when a full refinance isn’t ideal (e.g., due to break costs). |
Primary Asset Involved | Current property. | New, additional, or replacement property. | Current property. |
Application Process | Full new loan application (especially external), income / expense verification, credit checks, often new property valuation. | Mirrors a first home purchase: pre-approval, property search, offer, formal loan approval (including new property valuation), settlement. | Separate loan application; consent from the first mortgagee (primary lender) is usually needed if the second mortgage is with a different lender. |
Typical Timelines | Several weeks for external (e.g., 4-6 weeks); internal refinance is generally quicker. | Can span several months from initiation to completion. | Varies depending on the lender and your circumstances. |
Impact on Existing Mortgage | Replaced by a new mortgage. | Existing mortgage usually unaffected (unless refinancing it to release equity for a deposit for the new property). | Existing first mortgage unaffected; a new, separate loan is added. |
Number of Mortgages (Post-transaction on Primary Property) | One (the new, refinanced loan). | One (if old property sold); Two (if keeping old property with its mortgage). | Two (the original first mortgage and the new second mortgage). |
Essentially, refinancing modifies your existing commitment. Getting a new loan for a new property expands your commitments. A second mortgage adds another layer of debt to your current property.
Each path also has its pros and cons. Carefully considering these is essential to align your choice with your personal financial situation and goals.
Benefits of Refinancing vs Getting a New Home Loan
Each path has its advantages. The table below should help you in your decision on whether to refinance or get a new home loan.
| Refinancing Your Home | Getting a New Loan for a New Property | Taking Out a Second Mortgage |
|---|---|---|
Potentially secure lower interest rates and reduced monthly repayments. | Enables the purchase of an additional asset (e.g., investment property, holiday home) for potential capital growth or rental income. | Access equity without refinancing the entire first mortgage, useful if it has a very low fixed rate or high break costs. |
Access better loan features like offset accounts, redraw facilities, or more flexible repayment options. | Adding property to an investment portfolio can offer diversification benefits. | For smaller amounts, the process might be quicker than a full cash-out refinance (lender-dependent). |
Consolidate higher-interest debts (e.g., credit cards, personal loans) into the home loan for one manageable payment. | For investment properties, certain expenses may be tax-deductible (professional tax advice is essential). | Funds can be used for various purposes like home improvements, debt consolidation (if the rate is lower than existing debt), or investments. |
Access home equity (cash-out) for renovations, investments, or other large purchases. | Equity built up in an existing property can often be used as a deposit for the new property purchase. | May be an option if the primary lender is unwilling to approve a top-up or cash-out refinance on the existing mortgage. |
Adjust the loan term – shorten it to pay off faster or extend it to lower repayments (though this may increase total interest). | Facilitates moving to a new primary residence that better suits lifestyle needs or is in a more desirable location. | |
Switch between variable and fixed interest rates based on market outlook and personal preference. |
👉 For more information, go through: Benefits of Refinancing Your Australian Home Loan
Drawbacks of Refinancing vs Getting a New Home Loan
Obviously there are some disadvantages when refinancing or getting a new mortgage. The table below provides a quick overview of these drawbacks.
| Refinancing Your Home | Getting a New Loan for a New Property | Taking Out a Second Mortgage |
|---|---|---|
Costs are involved, such as exit fees from the old lender, application / establishment fees for the new loan, property valuation fees, and government charges. | Significantly increases overall debt levels and the responsibility of managing multiple loans or a larger loan. | Typically come with significantly higher interest rates compared to first mortgages or cash-out refinances because the second lender is in a riskier position. |
Substantial break costs can be charged if exiting a fixed-rate loan before the term ends. | Purchasing property involves substantial upfront costs beyond the loan, including stamp duty, legal fees, building inspections, and new loan setup fees. | You will have to manage and make two distinct mortgage repayments each month, which can complicate budgeting. |
LMI may be payable again if your equity is less than 20%. | Owning property comes with ongoing expenses like council rates, water rates, insurance, maintenance, and property management fees (for investments). | There will be additional setup fees associated with the second mortgage, such as application and valuation fees. |
The application process, especially for an external refinance, requires time and effort to gather documentation and complete paperwork. | Property investment has risks: market values can fluctuate, properties may have vacancy periods, and rising interest rates can increase holding costs. | This option increases the total debt and financial leverage against the property. |
Each new loan application triggers a hard inquiry on your credit file, which can cause a temporary dip in your credit score. | If equity from the primary residence is used to secure finance for the new property, this increases the debt secured against the family home, putting it at risk if repayments aren’t met. | Lenders often have stricter eligibility criteria for second mortgages, and the combined LVR of both loans usually cannot exceed 80%. |
There’s a risk the refinance application might be declined if your financial situation has deteriorated. | LMI may be applicable on the new loan if the deposit is less than 20% of the new property’s value. | Not all banks and financial institutions offer second mortgage products. |
A common pitfall is resetting the loan term (e.g., to 30 years), which can result in paying significantly more interest over time if not managed well. | The increased debt load will reduce borrowing capacity for other future needs until income significantly increases or the debt is paid down. | If the property’s market value falls below the total outstanding balance of both mortgages, the homeowner could face negative equity. |
The lender of the first mortgage usually needs to provide consent for a second mortgage, and they may charge a fee for this. |
Compare these with your situation and financial goals when considering whether to get a new home loan or refinance.
👉 For clarity, see: When to Refinance Your Mortgage in Australia
AU Expats—Stuck on Your Decision?
- Australian expats face unique challenges when securing or refinancing property loans in Australia. It’s possible but complex as lenders apply stricter scrutiny.
- Odin Mortgage specialises in simplifying this for Aussie expats. We'll help you weigh your options and find the right path. Talk to us today for clear, tailored advice.
- Speak with Australian expat mortgage specialists
Understanding the Costs Involved
Upfront fees can sometimes outweigh short-term savings from refinancing. Buying a new property always involves large government duties.
Being aware of these potential costs upfront will help you make a more informed choice and avoid unwelcome surprises.
| Fee Type | Refinancing (External) | New Loan (New Property) | Second Mortgage (Current Property) |
|---|---|---|---|
Discharge Fee (Old Lender) | Typically $150 – $500+. | N/A (unless selling an old property with a mortgage) | N/A |
Application / Establishment Fee | Can range from $0 (some lenders waive this) up to $1,000. | Typically $0 – $900+. | Potentially $300 – $800+. |
Valuation Fee | Usually $100 – $600+, though sometimes absorbed into the application fee. | Usually $200 – $600+. | Often $200-$600 or a percentage of the property value (e.g., 0.1%). |
Government Charges (Mortgage Registration / Deregistration) | Mortgage Registration Fee payable to state/territory government. May also include a Mortgage De-registration Fee. | Mortgage Registration Fee to register the new mortgage. | Mortgage Registration Fee for registering the second mortgage. Title Search Fees may also apply. |
Government Charges (Property Transfer Fee) | N/A | A government fee for transferring the property title into the buyer’s name. | N/A |
Stamp Duty | Generally not payable on a like-for-like refinance. May apply on the increased portion if the loan amount is significantly increased. | Yes, this is usually the largest single cost. Varies by state/territory, property value, and concessions. Can be tens of thousands. | Generally, not payable on the second mortgage loan itself. However, if funds are used for a dutiable transaction (like buying another property), it would apply to that transaction. |
Lenders Mortgage Insurance (LMI) | If LVR exceeds 80%. Can amount to several thousand dollars. | Payable if borrowing more than 80% of the property’s purchase price. | Less common, but depends on the combined LVR of both mortgages. Usually, the combined LVR cannot exceed 80%. |
Break Costs (for fixed-rate loans) | If exiting a fixed-rate loan early, these can be substantial. Heavily influenced by interest rate movements and remaining fixed period. | N/A | N/A (but avoiding them on the first mortgage might be a reason to consider a second mortgage). |
Legal / Conveyancing Fees | Less common for simple refinances but can occur. | Typically $800 – $2,000+ for legal work in transferring ownership and managing settlement. | Both you and the second mortgage lender will incur legal fees. |
Settlement Fee | Charged by the new lender, can range from $100 to $1,000. | Often included in conveyancing costs or can be a separate fee. | Yes, fees will apply. |
Building & Pest Inspection Fees | N/A | Advisable for due diligence, can cost up to $600 or more. | N/A |
Typical Interest Rate Indication | Market rates. | Market rates at the time of application. | Significantly higher than first mortgage rates. Can be 1.5 to 2.5 times higher than first mortgage private loan rates. |
First Mortgagee Consent Fee | N/A | N/A | The first mortgage lender may charge a fee to assess and provide consent for the second mortgage. |
Ongoing Loan Fees | The new loan may have monthly or annual account-keeping fees. | Associated with the new mortgage product. | May have associated ongoing fees. |
Note: Costs are indicative and can vary based on the lender, product, your location, and individual circumstances. Always get a detailed breakdown from potential lenders.
👉 For details on refinancing costs, see: How Much Does It Cost to Refinance a Home Loan?
Impact on Your Finances
Beyond upfront costs, refinancing vs getting a new home loan affects your finances differently. This includes rates, loan terms, credit scores.
| Financial Aspect | Refinancing (Existing Property) | New Loan (New Property) | Second Mortgage (Current Property) |
|---|---|---|---|
Interest Rates, Loan Terms & Features | The primary goal is often to secure a lower interest rate than the current one. You may also change their loan term (e.g., shorten it or lengthen it) and gain access to better features like offset accounts or flexible repayments. | The interest rate is determined by market conditions at the time of application and the chosen loan product. The loan term is typically 25 to 30 years for a new purchase. Available features depend on the specific product selected. | Interest rates are characteristically higher than for first mortgages or standard refinances due to the lender’s subordinate position. Loan terms are often shorter, commonly 10 to 20 years. Second mortgages may offer fewer features or charge higher fees for them. |
Accessing & Using Home Equity | A cash-out refinance consolidates new borrowing into a single, new primary mortgage. It can allow access to significant equity, typically up to an 80% LVR without LMI. Funds can be used for renovations, investments, debt consolidation, etc.. | Equity from an existing property is frequently used as a deposit for purchasing a new property. This equity is typically accessed via a cash-out refinance of the first property’s mortgage or through a separate equity loan/line of credit. | Allows homeowners to access equity without disturbing their existing first mortgage. The amount borrowable is limited by the combined LVR (often capped at 80% for both loans together) and the lender’s specific criteria. |
Future Borrowing Capacity & Credit Score | Every refinance application is a new credit application, resulting in a hard inquiry on the credit file, which can cause a temporary small dip in the credit score. If it helps consolidate high-interest debts well, it could improve the credit score over time. Securing a lower interest rate might positively influence future borrowing capacity. However, extending the loan term unnecessarily can increase total debt repaid. | Taking on a loan for an additional property significantly increases total debt obligations. This will reduce future borrowing capacity until income rises substantially or the new debt is significantly paid down. Multiple loan applications can also impact the credit score. | Adding a second mortgage increases total debt and monthly repayments, thereby reducing future borrowing capacity. The application is also a credit inquiry. Defaulting on either mortgage would severely damage the credit history |
These ongoing effects are crucial when you get a new mortgage or refinance. Your choice will shape your financial landscape for years.
👉 Check out: 8 Mistakes to Avoid When Refinancing a Mortgage in Australia
Critical Factors to Weigh Before Deciding
Choosing correctly requires careful thought. Consider your personal circumstances, financial goals, and market conditions.
The “best” option depends entirely on you. Your short-term and long-term goals matter.
Aligning with Your Financial Goals and Current Situation
The right choice is personal. It hinges on your specific needs, goals, risk tolerance, and current financial health.
Before looking at loans, define why you need a change:
- Lower payments?
- Cash for renovations?
- Buying another property?
- Consolidating debt?
A clear motive guides your decision. Assess your income, expenses, debts, and savings. This self-assessment is key when getting a new home loan or refinancing.
Understanding Your Borrowing Power
Lenders assess your borrowing power to decide how much they will lend. This is also known as serviceability.
They scrutinise key factors like:
- Income: Stable and sufficient income.
- Expenses: Living costs and discretionary spending.
- Existing Debts: Payments on other loans and credit card limits.
- Dependents: Number of children or other financial dependents.
- Savings History: Shows financial discipline.
- Credit Score: A strong history indicates reliability.
- LVR: Loan amount relative to property value. A lower LVR is better.
- Deposit Size: For new purchases, a larger deposit reduces lender risk. You might increase borrowing power by reducing debts, lowering credit card limits, saving more, and improving your credit score.
👉 Try for yourself: Borrowing Power Calculator
The Role of Your Credit Score
Your credit score reflects your creditworthiness. It’s based on your history of managing debts and payments.
Refinancing, like any new credit application, involves a credit check. This is a hard enquiry on your credit file and can cause a small, temporary dip in your score.
Multiple applications in a short time can have a bigger negative impact. Check your score before applying. If it’s low, try to improve it first as it’s crucial for loan approval and the interest rates offered.
LVR and LMI Implications
Loan to Value Ratio (LVR) is the loan amount divided by property value, as a percentage. For example, a $400,000 loan on a $500,000 property is 80% LVR.
Lenders Mortgage Insurance (LMI) usually applies for loans over 80% LVR. It protects the lender if you default and the property sale doesn’t cover the loan.
When refinancing or taking new debt, LMI can be a big extra cost. It can outweigh savings from a lower rate. LMI paid on a previous loan is generally not transferable or fully refundable.
Asking Your Current Lender First
“Loyalty tax” is when existing customers pay higher rates than new ones. Lenders often save their best deals for new business.
Before switching lenders, always ask your current lender for a rate review. Many are willing to negotiate, especially if you have a good history.
A successful negotiation is simpler, has less paperwork, and avoids many switching fees. This simple step can save time, effort, and money.
👉 For more information, see: Repricing vs Refinancing Your Mortgage in Australia
👉 You also need to consider the Documents Required for Refinancing in Australia.
AU Expats—Not Sure Which Route to Take?
- Choosing the right mortgage path requires careful planning. The best decision aligns with your financial goals, circumstances, and risk tolerance.
- It's about what works best for you. This clarity is essential when deciding on refinancing vs getting a new home loan. Regardless of your chosen path, a structured approach helps. We can help you with this.
- Our team specialises in simplifying the mortgage journey for Aussie expats. Gain tailored guidance to make confident decisions for your property goals and financial well-being.
- Find your best mortgage options
Key Takeaways
- Refinancing replaces your current mortgage, often for better terms or to access equity. ⬆️
- Getting a new mortgage involves new financing for another property, a second mortgage, or a bridging loan. ⬆️
- Compare goals, processes, and impacts to decide between modifying or expanding your mortgage commitments. ⬆️
- Each option has distinct upfront and ongoing fees, so compare them carefully before deciding. ⬆️
- Your choice affects rates, terms, equity access, borrowing capacity, and your credit score differently. ⬆️
- Align your choice with financial goals, borrowing power, credit, LVR, and always check with your current lender. ⬆️
See What You Qualify For
Get Immediate Insights on Your Mortgage Eligibility Discover your mortgage eligibility instantly"*" indicates required fields
