If your home loan is more than two years old, there’s a good chance you’re paying the “loyalty tax”, the gap between the rate banks offer new customers and the rate they quietly leave existing customers on. Refinancing closes that gap. The question is whether the saving beats the cost of switching.
When refinancing usually pays off
- Your rate is 0.25% or more above what new customers are being offered.
- Your fixed rate is expiring and you’re about to roll onto a high revert rate.
- Your property has grown in value, cutting your LVR below 80%, unlocking cheaper pricing tiers.
- You want features your current loan lacks: a real offset account, or the ability to consolidate debts.
What switching actually costs
Typical costs are modest: a discharge fee from your current lender (usually $150–$400), government registration fees of a few hundred dollars, and sometimes an application or valuation fee with the new lender, often waived. The big exception: break costs on a fixed-rate loan can run to thousands, so timing matters if you’re currently fixed.
The break-even test
Take your total switching costs and divide by your monthly saving. If switching costs $700 and a lower rate saves you $180 a month, you’re ahead in under four months, and every month after that is pure saving. On a $650,000 loan, a 0.4% rate cut is worth roughly $50,000 over a 30-year term.
Compare your current loan against a new one, including all the switching costs, with the mortgage switching calculator.
Open the mortgage switching calculator →A word on cashback offers
Lenders periodically offer $2,000–$4,000 cashbacks to refinancers. They can be genuinely worthwhile, but only if the underlying rate is competitive. A fat cashback attached to a rate 0.3% above market costs you more than it gives inside two years.
What the process looks like
Through a broker, refinancing is mostly signatures: Nathan compares your loan across 50+ lenders, negotiates pricing (sometimes your own bank suddenly finds a better rate rather than lose you), and manages discharge and settlement end to end. It costs you nothing, and most refinances complete within two to four weeks. See how refinancing works with Linton Finance or book a free loan review.