How to refinance a home loan in Australia, step by step

Refinancing is a new home loan that happens to pay off an old one. You will be assessed as if you were buying, minus the building inspector. The steps below are the operational path. If you have not yet decided whether to switch, start with when to refinance.

Step 1: Pull the current contract out of the drawer

You need: remaining balance, remaining term, rate type and fixed-end date, offset and redraw balances, annual fees, and any cashback clawback window. Ask the current lender for a payout figure valid for a future date — it will include per-diem interest. If you are fixed, ask for a break-cost estimate on a couple of hypothetical settlement dates.

Download two years of statements. You will need them anyway.

Step 2: Clean the file

Pay down or close unused cards if the limits are wrecking serviceability. Do not open a car loan this month. Check your credit file. If your name is wrong or an old telco default is yours-but-settled, fix it first.

If you are a couple, agree who is on the new loan. Removing a borrower is a different, harder application.

Step 3: Compare like a purchaser

Use the method in how to compare home loans. Same LVR (get a rough estimate from recent sales, not wishful thinking). Same occupancy. Decide if you still want an offset. Decide the term must not blow out.

Ask your current lender to match a real competing offer. Retention desks exist because switching costs them. If they match on the rate that matters, you may only need a variation, which is cheaper than a full refinance.

Step 4: Apply

Direct to a lender or via a broker. Provide ID, income (payslips, tax returns if self-employed), statements, existing loan documents, and a rates notice. Self-employed refinance is a longer file; start earlier.

Do not apply to five lenders 'just to see'. Each enquiry is a footprint.

Step 5: Valuation and unconditional approval

The new lender values the property. If the val comes in low, LVR rises and the deal can change or die. If it comes in fine, you receive formal approval with conditions (insurance, discharge, maybe a strata read).

Read the new contract. Comparison rate, package fee, offset rules, extra repayment rules. Settlement date is a three-way dance with the outgoing lender.

Step 6: Insurance, discharge, settlement

Keep building insurance current; the new lender wants to be noted as interested. The outgoing lender prepares discharge. There will be a discharge fee. A solicitor or conveyancer (in some states the lender's panel does much of this) books settlement. On the day, the new lender pays the old lender the payout figure. Surplus redraw or offset cash needs a plan: it can reduce the new loan or appear in your offset if you have one. Say which you want, in writing.

Step 7: After settlement

Cancel the old direct debit so you do not double-pay. Set up the new one to match your pay cycle. Confirm the old offset is closed and the money landed. Check the first new statement. Diary any fixed-rate end. If cashback is due, note the clawback period in the same calendar.

If redraw was large, do not celebrate by buying a jet ski. You just moved the debt; you did not delete it.

Timeline you can show a partner

Week 0: documents and decision. Week 1: application. Weeks 2–3: valuation and credit. Weeks 3–5: documents and settlement booking. Week 5–6: settlement. Your mileage will vary; regional properties and strata quirks add time.

Common stalls

• Outgoing lender slow on discharge.
• Unpaid council rates discovered at settlement.
• Name mismatches (married name, middle names).
• Fixed-rate break figure changing with market rates as the date moves.
• Self-employed add-backs rejected.

Start earlier than the social-media 'two weeks' claim. Refinance is boring when it works, which is the aesthetic this desk prefers.

Self-employed extra documents

Two years of returns, BAS, sometimes an accountant's letter, sometimes year-to-date management figures if you are in a hurry. Add-backs should be boring (depreciation), not creative. If the new lender is a non-bank with 'alt doc', read the rate. Convenience is priced.

Offset and redraw mapping

Draw a one-page diagram: old offset $X goes to new offset or to principal; old redraw $Y reduces payout or is paid to you. Settlement clerks are not mind-readers. Wrong mapping is how $18,000 sits in a dead account for a month.

The first statement

Check the new rate, the term (did they silently make it 30 years?), the account number for extra repayments, and whether the package fee landed. If something is wrong, call in week one, not year one.

What to tell the outgoing lender, and when

Do not cancel a direct debit before settlement. Do not announce you are leaving in a way that triggers a retention maze while the new file is still conditional — unless you want them to match, in which case announce it on purpose with a competing offer in writing. After settlement, confirm discharge and get a letter that the old account is closed. Keep it next to the new contract.

If a package includes insurance or a credit card, closing the mortgage may not close those. Hunt them down so you are not paying for a card you thought died.

Settlement-week manners

Answer the conveyancer the same day. Book insurance before you are asked a second time. Do not go camping without phone coverage if settlement is Tuesday. Refinances die on small human delays more often than on credit policy.

When it is done, celebrate with something that does not require redraw. You have moved a debt, not deleted one. Then set the new extra repayment before you get bored.

Documents to bring, and a last caution

When you sit down with a lender, broker, packager or yard manager, bring two years of statements, the current contract, ID, payslips, a payout figure, and a written competing quote if you have one. If they will not look at paper, they are selling speed. Speed is expensive in Australian credit.

Write down the thing you are afraid to ask — the fee, the balloon, the HELP treatment, the break cost — and ask it first, while you still have the nerve. The second conversation is always weaker. If the answer is vague, you do not have an answer.

This desk would rather you delay a week than sign a contract whose comparison rate you cannot explain to a friend. ASIC's MoneySmart remains the public-interest spare brain: use it the night before, not the morning after. And if the product only works on overtime that is not in your contract, it does not work. Buy a smaller thing, or wait. Waiting is still allowed.