5 Compelling Reasons to Refinance Your Home Loan – And the Smartest Way to Do It

Jaeneen Cunningham
Jun 13
5 min read

Updated: Jul 4

Refinance Home Loan — The potential financial rewards from refinancing can be substantial. With the right strategy, you can save thousands and shave years off your mortgage.

Refinancing your home loan may not sound like the most exciting financial decision you'll ever make, but for many Australian homeowners, it can be one of the most impactful. Whether you’re chasing lower interest rates, more flexible features, or simply more financial freedom, refinancing your mortgage can be the key to better cash flow, faster debt reduction, or achieving long-term goals like renovating or investing.

But is refinancing right for you? And how do you do it without falling into the common traps that can erode the potential savings?

In this article, we’ll explore the five most powerful reasons why Australians refinance their home loans — and the smartest strategies to go about it in today’s competitive lending market.

What Is Refinancing?

Before diving into the reasons, let’s clarify what refinancing actually means. Refinancing is the process of replacing your existing home loan with a new one — either with your current lender or a different one. The new loan pays out your old loan, and you begin repayments on the new terms.

This might sound like a lot of paperwork for minimal gain, but the potential financial rewards can be substantial. With the right strategy, refinancing can save you thousands and shave years off your mortgage.

The 5 Reasons Why Australians Refinance Their Home Loans

1. To Secure a Lower Interest Rate

Let’s start with the most obvious and compelling reason: saving money.

Interest rates are one of the biggest influences on how much you pay for your mortgage over time. A small reduction in your rate — even just 0.5% — can save you tens of thousands of dollars over the life of a 25- or 30-year loan.

Why This Matters Now:

Over the past few years, the Reserve Bank of Australia (RBA) has raised interest rates significantly. But lenders haven’t all increased their rates equally — and many are now offering competitive discounts to lure refinancers. If you’ve been with your current lender for more than two years, there’s a good chance you're not on the lowest available rate.

Real-Life Example:

Say you have a $500,000 loan with an interest rate of 6.5%. Refinancing to 5.9% could reduce your monthly repayments by around $180, and save you more than $43,000 over 25 years (assuming principal and interest repayments).

2. To Access Better Loan Features

A home loan isn’t just about the rate — the features matter too. Many Australians refinance to access more flexible loan options such as:

Offset accounts
Redraw facilities
Split loans (fixed and variable)
Additional repayment options without penalties

These features can help you manage your money more effectively, pay off your loan sooner, and even build a buffer for emergencies.

Offset vs. Redraw:

While both help reduce interest, offset accounts allow you to park savings in a separate account linked to your home loan, reducing the interest charged. Redraw facilities, on the other hand, let you access extra repayments you've already made.

If your current loan lacks these, refinancing may be your opportunity to upgrade to a more sophisticated loan package.

3. To Consolidate Debt

Many Australians carry multiple types of debt — credit cards, personal loans, car loans — all with much higher interest rates than a mortgage.

Refinancing gives you the chance to consolidate these debts into your home loan, potentially lowering your overall interest burden and simplifying repayments.

Example:

If you have $20,000 in credit card debt at 18% interest, rolling this into your mortgage at 6% could save you thousands — provided you don’t extend your loan term unnecessarily or return to bad habits.

Pro Tip:

Debt consolidation can be powerful, but it’s not a magic fix. It only works if you don’t rack up new debt afterwards. Consider financial counselling if debt has become unmanageable.

4. To Tap Into Home Equity

If your property has increased in value since you took out your mortgage, you may be able to access that equity through refinancing.

This equity can be used for:

Home renovations
Investing in property or shares
Starting a business
Paying for education or big expenses

Lenders will typically let you borrow up to 80% (sometimes 90–95% with LMI) of your property's current market value, minus what you owe.

Equity Access Example:

Your home is now worth $800,000 and you owe $500,000. That gives you $140,000 in accessible equity (80% of $800,000 = $640,000, minus $500,000 owed).

Tapping this equity via a refinance can be a smarter alternative to high-interest personal loans.

5. To Switch from Variable to Fixed (or Vice Versa)

In a volatile interest rate environment, many homeowners feel nervous about where rates are headed. Refinancing allows you to:

Fix your rate for stability

Switch to variable to benefit from future rate drops

Split your loan into fixed and variable components

Why This Is Timely:

If you locked in a low fixed rate a few years ago, you may now be facing the “fixed-rate cliff” as that term ends — with a sharp increase in your monthly repayments. This is a great time to shop around and refinance to a competitive rate that suits your current lifestyle and risk tolerance.

Best Ways to Refinance Your Home Loan in Australia

Refinancing is about more than just comparing rates online. To do it right — and maximise the benefits — you’ll need to be strategic. Here’s how:

1. Compare Lenders — Not Just Rates

Don’t fall into the trap of only comparing headline rates. Look at the comparison rate, which includes fees and charges, and consider the loan features, flexibility, and customer service.

Use these tools:

Canstar
Mozo
RateCity
Finder

2. Check the Costs of Refinancing

Refinancing isn’t free. Costs can include:

Discharge fees (your current lender)
Application fees (new lender)
Valuation fees
Legal fees
Break costs (for fixed loans)

Make sure the savings outweigh the costs. Many lenders offer cashback offers ($2,000–$4,000 is common) which can offset these expenses.

3. Understand Your Equity and Borrowing Power

Lenders assess your loan-to-value ratio (LVR) — the loan amount as a percentage of your property’s value. If your LVR is above 80%, you may need to pay Lenders Mortgage Insurance (LMI) again, which can be thousands.

Make sure your property has increased in value, and your income and expenses still meet the lender’s requirements.

4. Time It Right

The refinancing process can take 2–6 weeks, depending on the lender and paperwork. Avoid refinancing right before applying for a car loan or credit card, as it temporarily affects your credit score.

Also consider your fixed rate expiry — breaking a fixed loan early can cost you thousands in penalties.

5. Work with a Mortgage Broker

Refinancing can be complex. The fifth and smartest way to refinance is to speak to a licenced, qualified mortgage broker like Etairos Finance. We can:

Compare hundreds of loans for you
Help with paperwork
Recommend the right lenders for your situation
Negotiate on your behalf

Look for a broker accredited with The Mortgage & Finance Association of Australia (MFAA) and who have been in long-term in the industry.

Final Thoughts: Is It Time to Refinance?

If you’re like many Australians, chances are you're on set and forget with your mortgage. But in today’s market, that could mean wasting thousands of dollars each year.

Refinancing isn’t right for everyone, but it’s worth reviewing your loan at least every two years, or after major life changes like marriage, a new baby, job changes, or a significant rate rise.

Ask Yourself:

Am I paying more than 6% interest?
Does my loan offer flexible features?
Have I built up equity in my home?
Am I carrying high-interest debts?
Is my fixed term ending soon?

If you answered "yes" to any of the above, it's time to review your mortgage. A smarter loan could mean more money in your pocket, greater control over your finances, and a faster path to financial freedom.