Types of Refinance in Australia
Imagine coming home after a long day and seeing another letter from your bank. Or an email. It’s a reminder that your mortgage is one of your biggest monthly bills—always in the back of your mind.
You may have wondered how to make those payments easier, save money, or unlock the value you’ve built up in your home. The truth is, you’re not stuck with your current loan forever. Homeowners everywhere are looking at their options and discovering more than one way to refinance.
Whether you want to lower your interest rate, access extra cash, or simply get a loan that better fits your life, understanding the types of refinance available is the first step.
In this article, we break down the five major options Australian homeowners use, explain how each works, and help you determine which could work best for your situation.
Let’s start with the initial classification: internal and external refinancing.
Internal vs External Refinancing
When you decide to refinance, you have two choices about where to get your new loan. You either do so internally or externally.
Internal refinancing is when you stay with the same lender but get a different loan product. It might be easier because they already know you.
External refinancing is when you switch to a different lender for your new home loan. People often do this to try to get a better deal.
It’s the most general way to classify refinancing—based on whether you stay with your current lender or switch to a new one. But that’s just the surface.
There are specific types of refinance strategies within both internal and external refinancing. Each is designed to meet different financial goals. Whether you’re trying to lower your interest rate, access equity, simplify your debts, or pay off your loan faster, there’s a type of refinance that fits.
We’ve included a quick overview image below to help you easily compare the main types of refinance in Australia. It shows how they stack up against each other in terms of one key benefit, potential drawback, and when to consider them.
👉 Also check out:
- Will Refinancing Save Me Money?
- Refinance Home Loan Offers in Australia
- How Often Should You Refinance Your Home Loan?
Now let’s take a closer look at each mortgage refinance type.
1. Rate and Term Refinance: The Most Common Choice
With a rate and term refinance, you get a new home loan for about the same amount as you still owe on your old loan.
The main changes are the interest rate (the extra money you pay the bank) and the term (how long you have to repay the loan).
You can refinance to get a lower interest rate. This means you pay less extra money to the bank over time. This can make your monthly payments smaller, too.
You can also refinance to change the length of your loan. If you make the loan term longer, your monthly payments may go down. However, you’ll likely pay more interest over a longer time.
Conversely, a longer loan term typically means higher monthly payments. You’ll pay off your loan faster and pay less interest overall, though.
You can potentially save money on interest or change your monthly payments to better fit your budget.
Requirements
To get a rate and term refinance, the bank will look at a few things:
- Your Income: They want to make sure you can comfortably afford to pay back the new loan.
- Your Credit History: This is like your report card for borrowing money in the past. If you’ve paid your bills on time, you’ll have a better chance of getting approved and getting a good interest rate.
- Equity: Banks usually like you to own at least 20% of your home.
Benefits & Drawbacks
| Benefits | Drawbacks |
|---|---|
Lower Interest Rates: You could save a lot of money over the life of the loan. | Refinancing Costs: Just like getting your first home loan, there can be fees to refinance. These could be application fees, valuation fees, and settlement fees. You need to make sure the savings are worth these costs. |
Lower Monthly Payments: This can free up money for other things. | Break Costs: Refinancing a fixed-rate loan before its term ends could cost you expensive break fees. |
Pay Off Your Loan Faster: If you shorten your loan term. | Longer Loan Term Means More Interest: If you refinance to a longer loan term to lower your monthly payments, you’ll likely pay more interest in total over the longer time. |
Switch Between Fixed and Variable Rates: You can choose if you want your interest rate to stay the same for a while (fixed) or change with the market (variable). | |
Access Better Loan Features: Your new loan may have helpful things like an offset account or a redraw facility. |
When to Consider It
A rate and term refinance can be suitable if:
- The interest rates offered now are lower than what you’re currently paying.
- You want to change your loan term to pay off your loan faster or have smaller monthly payments.
- You want to switch from fixed to variable rates or vice versa, depending on what you think will happen with interest rates.
- You want access to better loan features like an offset account or redraw facility.
👉 Check out: Benefits of Refinancing Your Australian Home Loan
2. Cash Out Refinance: Access Your Home Equity
With a cash out refinance, you borrow more than you currently owe on your mortgage. The extra money is given to you in cash after your old loan is paid off.
Say you owe $200K on a house worth $400K. Your equity would be $200K. You may be able to refinance for $250K, with $50K being extra cash in your hands.
To better understand this, imagine your house is a piggy bank. The money inside is the part of the house you own, i.e. your equity. A cash out refinance lets you take some of that “money” out that you can use for various purposes.
Requirements
A cash out refinance generally requires:
- Good Credit Score and Steady Income: Just like any loan, the bank wants to be sure you can pay back the larger loan.
- Sufficient Home Equity: You need to own a good portion of your house to be able to borrow more money against it. Banks usually allow you to borrow up to a certain percentage of your home’s value, often 80%.
- Purpose: The lender may ask what you plan to do with the extra cash.
Benefits & Drawbacks
| Benefits | Drawbacks |
|---|---|
Consolidate Debts: You can use the cash to pay off other debts with higher interest rates, like credit cards or personal loans. This can simplify your finances. | Increased Mortgage Debt: You now owe more money on your home loan. |
Pay for Home Renovations: If you want to fix up your house, this can be a good way to get the money. | Higher Monthly Payments: Because you’ve borrowed more, your repayments will likely go up. |
Invest in Other Properties or Shares: You could use the cash for other investments. | Potential for a Higher Interest Rate: The interest rate on your new, larger loan might be higher. |
Fund Education or Other Big Expenses: Like paying for a child’s college. | Reduced Home Equity: You own a smaller percentage of your house. |
Added Fees and Costs: Cash out refinance loans often have extra fees. |
When to Consider It
Consider a cash out refinance if:
- You have high-interest debts you want to pay off
- You need funds for significant home improvements or other investments
- You are confident you can manage the higher repayments
- The benefits of using the cash outweigh the increased loan costs
It may be a good idea to check the differences between cash out refinance and debt consolidation.
👉 Check out: How Soon Can You Refinance a Mortgage?
AU Expats—Still Overpaying on Your Aussie Mortgage from Overseas?
- As an Aussie expat, you're likely paying a higher interest rate, limited by outdated loan features, and unable to tap into the equity you’ve built. And the longer you wait, the more it costs.
- You’re missing out on savings every month, your financial flexibility is shrinking, and worse—most lenders won’t even offer you the best deals because you live abroad. What should be a smart move, refinancing, is now a confusing, expensive hassle.
- That’s where Odin Mortgage steps in. We’re Australia's leading mortgage broker for expats and non-residents. We know the policies, the lenders, and the loopholes. Whether you want to reduce your repayments, access equity, or finally get a loan that fits your global life, we make refinancing from overseas simple and stress-free.
- Talk to a Refinance Expert Today
3. Cash In Refinance: Reducing Your Loan and Improving Your Position
A cash in refinance is the opposite of a cash out refinance. Instead of taking cash out, you put extra cash in when you refinance.
You take out a new mortgage for a smaller amount than what you currently owe. You pay the difference with a lump sum of your own money.
Say you owe $300K on your house. You refinance for a new loan of $250K and pay $50K in cash to the bank. Your old loan is then paid off. The major benefit is that you reduce your overall loan amount right away.
Requirements
The main requirement is the availability of a lump sum of cash.
Benefits & Drawbacks
| Benefits | Drawbacks |
|---|---|
Lower Your Loan Principal: You owe less money on your home. | Requires a Significant Amount of Cash: You need to have a large sum of money to put towards your loan. |
Secure a Lower Loan-to-Value Ratio (LVR): This is the amount you owe compared to the value of your house. A lower LVR can help you get better interest rates. | Other Ways to Reduce Your Principal: You could also just make extra payments to your existing loan. |
Qualify for Better Interest Rates: Lenders often offer better rates to people with lower LVRs. | |
Reduce Your Monthly Repayments: With a smaller loan amount, your payments will likely go down. | |
Potentially Remove Lenders Mortgage Insurance (LMI): If your equity increases enough. |
When to Consider It
A cash in refinance could be ideal if:
- You’ve come into a significant amount of money, like from a tax refund or inheritance.
- You want to lower your LVR to get a better interest rate.
- You want to reduce your monthly repayments significantly.
- You want to pay off your home loan sooner.
4. Debt Consolidation Refinance: Streamlining Your Liabilities
With a debt consolidation refinance, you borrow more on your home loan. It’s enough to pay off your existing mortgage plus all your other debts.
Your new lender then pays off your other debts, and you’re left with just one loan – your home loan – with a bigger balance.
If you have multiple debts, like credit cards and personal loans, this can help you put them all together into your home loan. You simplify your finances by having just one repayment to manage.
Requirements
A debt consolidation refinance requires:
- Eligibility for a Larger Loan Amount: You need to be able to borrow enough to cover your current mortgage plus your other debts.
- Assessment of Your Existing Debts: The lender will want to know about all the debts you want to consolidate.
Benefits & Drawbacks
| Benefits | Drawbacks |
|---|---|
One Regular Repayment: Instead of many, which can be easier to manage. | Potential for Much Higher Total Interest Paid: Even with a lower interest rate, if you spread your debt over the long term of your home loan, you could pay more interest in total. |
Potentially Lower Overall Interest Rate: Home loan interest rates are usually lower than those on credit cards and personal loans. This could save you money on interest. | Securing Unsecured Debt Against Your Home: If you can’t repay your home loan, you could lose your house, even for debts that weren’t originally secured. |
Clearer Timeframe to Be Debt-Free: Having one loan can make it easier to see when you’ll pay everything off. | Risk of Re-Accumulating Debt: If you don’t change your spending habits, you could run up your credit cards again even after consolidating them. |
Reduced Stress: Managing fewer bills can be less overwhelming. | Refinancing Costs: Like other types of refinances, there will be fees. |
When to Consider It
Consider a debt consolidation refinance if:
- You are struggling to manage multiple debt repayments.
- You have high-interest debts and can secure a lower interest rate with your home loan.
- You are disciplined with your spending and won’t re-accumulate debt.
- You understand the potential for paying more interest over the long term.
👉 Check out: Property Valuations & Appraisals for Refinancing
5. Fast Refinance: For a Quicker Switch
Fast refinance aims to speed up the usual refinancing process. It often involves less paperwork and a faster approval time.
Your new bank often does most of the work for you, like contacting your old bank.
Westpac, for example, has introduced a streamlined mortgage refinancing policy to make it easier for eligible customers to switch. The major benefit is the speed and convenience of switching to a new home loan.
Requirements
Here are the requirements for a rapid refinance in Australia:
- Selected Lenders: Rapid refinance is usually only available with certain banks that have agreements in place.
- Eligibility Criteria of the Lender: Not everyone will qualify for rapid refinance. There may be specific requirements about your loan type or the bank you’re with.
- Clear Credit Repayment History: Streamlined refinance usually requires a good credit history.
- Lower Monthly Repayments: Lenders may require your new monthly repayments to be lower.
Benefits & Drawbacks
| Benefits | Drawbacks |
|---|---|
Faster Approval and Settlement: You can switch lenders much quicker than with a standard refinance. Sometimes approval can happen in just a day. | Potential for Much Higher Total Interest Paid: Even with a lower interest rate, if you spread your debt over the long term of your home loan, you could pay more interest in total. |
Less Paperwork: The process is often simpler, requiring less documentation. | Potential Holding of Funds: Some lenders may hold back a small amount of money for a short period as a reserve. |
Managed by the New Lender: Your new bank will handle much of the process of switching over your loan. | Westpac’s Limitations: Westpac’s streamlined option may not allow cash out or debt consolidation. |
Potential Cost Savings: Some lenders don’t charge extra fees for rapid refinance. |
When to Consider It
Rapid refinance could suit you if:
- You want to refinance quickly and efficiently.
- You are eligible for the rapid refinance program with your chosen lender.
- You meet the specific criteria for streamlined options like Westpac’s policy.
👉 Check out: Rapid Refinance Document Checklist for Australia
AU Expats—Lost in the Loan Maze While Living Abroad?
- Refinancing in Australia while living overseas is full of roadblocks—foreign income, time zones, and banks that don’t cater to expats.
- You’re forced to navigate outdated systems, endless paperwork, and conflicting advice, only to be rejected or offered a second-rate deal. It’s exhausting, expensive, and slows your path to building wealth.
- Let Odin clear the path. We specialise in helping Aussie expats refinance with confidence, clarity, and competitive rates. Our expert brokers handle the complexity—so you don’t have to.
- Speak to our Expat Mortgage Specialist Today
Specialised Refinancing Types
While many homeowners are familiar with standard refinancing options cash out, a separate tier of specialised refinancing exists in Australia.
These are tailored to unique financial circumstances and asset types, such as investment properties, or specific loan structures like private loans.
Refinancing for Investment Properties
For property investors, refinancing is a strategic tool to maximise returns.
The process is distinct as lenders assess the property’s rental yield and the borrower’s overall investment portfolio.
Lenders typically have stricter criteria for investment loans, often requiring a lower LVR compared to owner-occupied properties. This means investors may need more equity to be eligible.
The tax implications of refinancing an investment property also add a layer of complexity not present in standard home loan refinancing.
👉 Learn more: Refinance Investment Property in Australia
Refinancing for Commercial Properties
Refinancing a commercial property loan is a common strategy for business owners to improve their financial position.
This type of refinance is heavily dependent on the business’s financial health and performance.
The assessment process for commercial refinancing is rigorous, with lenders closely examining business balance sheets, cash flow statements, and future projections.
The property’s type, location, and lease agreements are also critical factors, making it a more complex undertaking than residential refinancing.
👉 Learn more: Refinance Commercial Property in Australia
Refinancing from Private Lending
Refinancing a private loan involves moving a mortgage from a private lender to a traditional bank or financial institution.
Borrowers often initially turn to private lenders for faster access to funds or if they don’t meet the strict criteria of mainstream banks.
Refinancing to a bank loan can offer significantly lower interest rates and more favourable terms.
The primary reason for this separate classification is the difference in lending standards. Private loans are often secured with less documentation and at higher interest rates.
Therefore, when refinancing, banks conduct a thorough assessment of the borrower’s financial situation and the property to ensure they meet standard lending criteria.
👉 Learn more: Refinancing Private Loans in Australia
SMSF Loan Refinancing
Refinancing a Self-Managed Superannuation Fund (SMSF) loan is a specialised process for Australians who have used their superannuation to purchase property.
The main driver is to secure a better interest rate or loan terms, which can enhance the retirement fund’s performance.
This area of finance is highly regulated, making it a distinct category.
The key difference lies in the strict legal and compliance framework surrounding SMSFs. The loan must adhere to the ‘limited recourse borrowing arrangement’ (LRBA) rules, meaning the lender’s claim is restricted to the specific property in case of default.
This unique structure requires specialised legal and financial advice.
👉 Learn more: Refinance an SMSF Loan in Australia
Refinancing Your Business Loan
Business loan refinancing allows companies to replace an existing business loan with a new one, often to gain more favourable terms.
The goal is to improve cash flow and the overall financial health of the business, freeing up capital for other operational needs.
Unlike personal loans, business loan refinancing is assessed based on the company’s financial performance and stability.
Lenders will analyse revenue, profits, and cash flow projections to determine the business’s ability to service the new loan. The purpose of the loan and the industry in which the business operates also play a significant role in the lender’s decision.
👉 Learn more: Refinance a Business Loan in Australia
Refinancing a Home Equity Loan
Refinancing a home equity loan allows homeowners to replace their current loan with a new one, typically to secure better interest rates or repayment terms.
The aim is to reduce monthly repayments, access additional equity, or consolidate debt for improved financial flexibility.
Unlike standard home loans, home equity loan refinancing focuses on the available equity in the property and the borrower’s repayment history.
Lenders will assess the property’s current market value, outstanding mortgage balance, and the borrower’s income and credit profile to determine eligibility and loan terms.
👉 Learn more: Refinance a Home Equity Loan in Australia
Refinancing Without Income Verification
Products that allow for refinancing without income verification are extremely limited. You’re more likely to find and qualify for low doc refinance instead.
👉 Check out No Income Verification Refinance to learn more.
These specialised refinances are classified separately due to their distinct risk profiles, assessment criteria, and regulatory requirements.
👉 Check out: Documents Required for Refinancing in Australia
Important Refinance Considerations
Understanding the different types of refinance in Australia is a great starting point. However, there are a few other key factors to keep in mind.
These can have a significant impact on your overall savings, long-term goals, and even your eligibility.
From calculating hidden costs to navigating unique loan structures like reverse mortgages, it’s important to take a step back and look at the bigger picture.
You’ll also need to approach refinancing with a solid strategy and a clear understanding of the process ahead.
Let’s break down the most important elements to consider beyond just choosing the refinance type so you get and keep the best deal for years to come.
Refinancing from Low Doc to Full Doc
You can refinance from a low doc to a full doc mortgage in Australia.
It’s replacing your existing low doc loan (where income proof is limited, e.g., declarations, BAS statements) with a standard full doc loan (requires full income verification like payslips and tax returns).
👉 Learn more: Can I Refinance From Low Doc to Full Doc?
Refinancing a Fixed Home Loan
You can refinance a fixed rate home loan in Australia. However, your success depends on how and when you refinance.
You can either refinance mid-term or at the end of your fixed term.
Refinancing at the end is the most common and cost-effective approach. If you refinance mid-term, you’ll almost always have to incur break costs that can be thousands of dollars.
👉 Learn more: Can You Refinance a Fixed Loan? Fixed Rate Mortgage Refinance
Calculating Refinancing Costs
It’s really important to work out all the costs of refinancing and compare them to the potential savings. These costs can include:
- Exit fees from your current lender
- Break costs if you have a fixed-rate loan
- Application fees for the new loan
- Valuation fees to assess your property’s worth
- Settlement fees for the legal work
- LMI if you don’t have enough equity (usually less than 20%)
- Ongoing fees for the new loan
Ensure your savings with the new loan exceed these costs over the time you plan to have the loan.
👉 Learn in detail by going through How Much Does It Cost to Refinance a Home Loan?
Refinancing a Home Loan with a Reverse Mortgage
A reverse mortgage is a special loan type usually for retirees. It allows them to access some equity in their home as cash without having to sell it.
Unlike regular refinances, you usually don’t have to make repayments on a reverse mortgage while you live in the home.
However, this is a very different type of loan than the refinances we’ve talked about. So, getting financial advice is important if you’re considering one.
You can try the Reverse Mortgage Calculator for estimations.
Tips to Effectively Refinance in Australia
Choosing the right type of refinance is only part of the puzzle. To truly maximise the benefits of refinancing your home loan in Australia, you’ll need a solid strategy behind the decision.
Here are some essential tips to help you refinance effectively, no matter which type you choose:
- A higher credit score can help you secure better interest rates when refinancing.
- Utilise the equity in your home to potentially access better refinancing options.
- Compare different loan offers to find the most favourable terms.
- Be vigilant about additional costs like application fees, appraisal fees, and other charges that may not be immediately apparent.
- Ensure that the terms of the refinanced loan align with your long-term financial objectives, such as paying off the loan faster or reducing monthly payments.
👉 For a more detailed guide on the refinancing process, refer to Strategic Refinancing Tips for Australia
The Home Loan Refinancing Process
To ensure a successful refinance, consider the following key steps:
- Determine whether you’re aiming to reduce monthly payments, shorten your loan term, or access home equity.
- Research various lenders to find competitive rates and terms that align with your financial objectives.
- Engage with a broker to navigate the refinancing landscape and identify suitable loan products.
- Assess all potential expenses, including application fees, appraisal costs, and any break fees, to understand the financial impact.
- Gather essential documents such as income statements, credit reports, and property details to streamline the application process.
- Be aware that the refinancing process typically takes 30–60 days, though this can vary based on individual circumstances.
While choosing the right refinance type is crucial, a thorough approach is essential for an effective home loan refinance in Australia.
👉 Learn more about How to Refinance a Home Loan in Australia
AU Expats—Paying a Loyalty Tax Without Realising It?
- If you haven’t reviewed your Aussie mortgage since moving overseas, you’re probably paying a “loyalty tax”—that hidden cost of sticking with your lender while better deals pass you by.
- It’s quietly draining your savings. While rates drop and property values rise, you’re locked into a loan that’s doing nothing to grow your wealth or support your goals.
- We help Aussie expats like you break free from outdated loans and unlock smarter refinancing options—designed for non-residents. We’ll find the right lender and the right structure to fit your expat life.
- Stop Overpaying and Refinance Today
Key Takeaways
- You can refinance internally or externally, each offering different benefits and flexibility. ⬆️
- Rate and term is used to lower interest rates, adjust loan terms, or switch between fixed and variable rates. ⬆️
- Cash out refinance allows you to tap into your home equity for large expenses by increasing your loan balance. ⬆️
- Cash in refinance lets you reduce your loan amount with a lump sum payment, improving your equity position. ⬆️
- Debt consolidation refinance combines your home loan with other debts into one repayment, simplifying finances. ⬆️
- Fast refinance speeds up the refinancing process with faster approvals and less paperwork. ⬆️
- Other refinancing types are tailored to unique situations and asset types. ⬆️
- Assess hidden costs, understand the full process, and match your refinance type with a solid financial strategy to refinance effectively. ⬆️
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