“Refinancing is not always the right move. Knowing the downsides before you start prevents expensive mistakes.” [cite: 159]
The appeal of refinancing is straightforward: lower repayments, better features, access to equity. [cite: 160] The downsides are less visible but they are real, and worth understanding before you apply. [cite: 161]
Switching costs
A standard external refinance carries total costs of roughly $500 to $2,000, covering discharge fees from the current lender ($150 to $400), government registration fees ($100 to $300 per state), and application and valuation fees at the new lender (often $0 to $600 each). [cite: 163] These costs need to be recovered through interest savings before the refinance actually puts you ahead. [cite: 164]
The loan term reset trap
Refinancing to a new 30-year loan when you are 10 years into your current loan means you are back at the start. [cite: 166] Even at a lower rate, you may pay significantly more total interest over the extended life of the loan. [cite: 167] Keeping the same term or choosing a shorter one avoids this, and a broker can identify lenders who allow it. [cite: 168]
Break costs on fixed rate loans
Exiting a fixed rate loan early can trigger a break cost. [cite: 170] The amount depends on the rate differential between your fixed rate and current wholesale rates, your outstanding balance, and the time remaining on the fixed term. [cite: 171] In some rate environments, this cost can run into the tens of thousands of dollars. [cite: 172]
Credit enquiries
Each formal loan application creates a credit enquiry on your file. [cite: 174] Submitting applications to four or five lenders simultaneously to test which approves you sends a flag to credit reporting agencies and can lower your credit score. [cite: 175] Using a broker means one well-targeted application rather than multiple competing enquiries. [cite: 176]
LMI may apply again
If your property has not grown in value and your LVR is still above 80%, you may need to pay Lenders Mortgage Insurance again when refinancing. [cite: 178] LMI paid on the original loan is generally not transferable or refundable. [cite: 179]
You may consider seeking independent advice from a licensed mortgage broker or financial professional to assess your personal circumstances. [cite: 180] This information is general in nature and does not take into account your objectives, financial situation or needs. [cite: 181] Refinancing decisions depend on individual circumstances. Speak with a licensed mortgage broker for advice specific to your situation. [cite: 182] All loans are subject to lender approval. [cite: 183]
Sources: ASIC MoneySmart, Refinancing Your Home Loan 2025; NAB, Cost to Refinance a Home Loan; Westpac, Refinancing Costs 2025; [cite: 184] Navigate Financial Wealth, Refinancing Home Loan 2026. [cite: 185]
