How to refinance a home loan

      couple thinking of refinancing their home loan

       Last updated: 31 March 2025 |  Estimated read time: 5 Minutes

      Refinancing your home loan can be a smart financial move, but it’s important to understand the process and what it entails. 

      Here’s a comprehensive guide to help you navigate through it:

      1. Do your research: review and compare home loans

      It’s likely you’ve started thinking about refinancing after seeing an ad for an attractive looking home loan interest rate – but make sure you have thoroughly researched what’s on offer, and look at a few others to compare. It’s important to understand things like upfront and ongoing fees and charges, the features of the loan, and the comparison rate. The comparison rate will help give you a clearer indication of the true cost of a loan, as it includes the interest rate, and most fees and charges relating to a loan, reduced to a single percentage figure – use this to compare home loan comparison rates during your research period. 

      There could also be key features you want included in the new loan - like an offset sub-account - so be sure to compare home loans online and work out which option works for you.

      2. Gather documentation and financial information

      When you approach a lender, they will need you to provide documentation for things like income, accounts, etc. Starting the process with all financial documents in order can make the rest of the process easier.

      Gather recent pay slips or proof of income, bank statements, credit card and loan statements, to work out monthly expenses.

      Make a note of current loan repayments, interest rates (including comparison rates), ongoing fees, and any discharge fees or break costs. 

      Now that you have an idea of how much you need to borrow, work out how much you can borrow – use our borrowing power calculator, or talk with a lending specialist to talk through what you need, and what you can afford.

      3. Talk to lenders or brokers about applying 

      After finding the mortgage that ticks all the boxes, it’s then time to apply for a home loan. This can be done with the help of a mortgage broker or directly via the lender; depending on the broker or lender chosen, either in-person, over the phone or online. This will require the same type of information as applying for a new mortgage such as property details and income and expenses, as well as details of the existing loan. The lender may provide conditional approval while they do some further checks – this should be provided to you with all conditions clearly listed. These conditions will depend on your unique circumstances, but might include things like a property valuation or the provision of pay slips. After this, a formal loan approval can be provided.

      4. Understand your loan documents before signing

      It’s important to read the loan agreement carefully and ensure that all terms and conditions are clear to you. Top tips: Never be afraid to ask for clarification on contract terms or clauses – it’s important you’re comfortable with what you’re signing, because this is a big decision. Don’t feel pressured to sign anything you don’t agree to – if you decide you are not comfortable with the terms of the loan documents or are not satisfied with the assistance provided by the broker/lender, you are allowed to walk away.

      5. The final step. Settlement

      The new lender will confirm the settlement date, which is the date the mortgage officially switches from one lender to another, or to a new product if staying with the same lender.

      Tips for refinancing

      Consider upfront charges

      There are usually fees associated with refinancing, as well as (in some cases) home loan break costs to pay out an old mortgage early. .

      • Loan application (or establishment) fee – a one-off cost to set up the new home loan.
      • Valuation fee – to cover a professional property valuation.
      • Title protection fee – covers the lender for property fraud and other risks during the title transfer period.
      • Settlement fee – covers administrative costs involved with settling the loan.
      • Discharge, break, or exit fees – previous lender may charge this. Make sure you read the loan contract you signed with your previous lender so you’re across any such fees you might have to pay.
      • Government fees – such as stamp duty or mortgage registration fees.
      • Monthly loan fees or annual package fees for the new loan. 
      • Risk fees to protect the lender, such as Lender’s Mortgage Insurance. 

      Check if any risk fees will apply

      These types of fees usually apply where the amount borrowed is greater than 80% of the property value.

      There may be costs involved with refinancing and switching lenders or products. Ranging from loan application fees with your new lender, to a discharge fee with your outgoing lender, an even property valuation and risk fees - refinancing isn’t as straightforward as changing your direct debit details. So before you go and refinance to save a few basis points off of your existing interest rate, make sure you read the terms of your current loans carefully (including break fees, interest rates, comparison rates etc.) and weigh these up against the features of any refinance options you’re considering, including the loan term. Learn more about what fees to expect when refinancing.

      Impact on credit score

      Lots of things can impact your credit score, including when a credit provider obtains a copy of your report during your credit application. Whilst each of the Australian credit reporting bodies calculate credit scores differently, making multiple applications within a short space of time can negatively affect your credit score. Find out more about credit reporting.

      Borrow within your means

      Seeing an enticing offer can make you want to borrow more than you need “just in case”, but don’t forget that variable interest rates fluctuate, and fixed interest rates have an end date – and you need to be able to afford repayments comfortably should anything happen.

      Want to know more? We’re here to help.

      Refinancing a home loan doesn’t have to be complicated. You can apply online with Pepper Money in less than 20 minutes if you are an eligible customer with PAYG Income.

      If you're self-employed or just prefer to speak to one of our friendly lending specialists, then submit an online enquiry or call our team on 137 377.  

        

      Barry Saoud - Pepper Money General Manager, Mortgages and Commercial Lending

      Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending

      Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.

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