Get the full switching-cost figure
Before refinancing, obtain written quotes for closing your current loan and setting up the next one. Depending on the loans, costs can include a discharge fee, fixed-rate break costs, application or settlement fees and mortgage registration charges. If the new valuation leaves you with less equity than expected, lenders mortgage insurance may also affect the comparison.
Separate upfront costs from annual package or account fees. Check conditions on promotional offers rather than assuming a cashback covers everything. If costs are added to the loan, you will generally pay interest on them too.
A simple hypothetical break-even example
Suppose switching costs total $1,800 and the estimated reduction in monthly interest and ongoing fees is $150. A rough break-even period is $1,800 divided by $150, or 12 months. These are illustrative figures, not a current lender offer or a promise of savings.
This shortcut assumes stable savings and ignores the changing loan balance and timing of cash flows. Use a detailed loan comparison for the actual decision. If you expect to sell, refinance again or repay the loan before break-even, the switch may not recover its cost.
Do not confuse repayment relief with interest savings
A smaller repayment can result from restarting a longer term, even without a meaningful rate improvement. Compare both loans over the same remaining term and repayment type first. Then compare total interest, fees and the balance outstanding at a common future date. If you deliberately extend the term for cash-flow reasons, understand the lifetime-cost trade-off.
Include the features you actually use
A cheaper basic loan may remove an offset feature you rely on. A package loan may include fees for benefits you rarely use. Check how your usual cash balance, extra repayments and access needs affect the comparison. Read our offset versus redraw guide before treating those features as interchangeable.
Ask your current lender for a review
A rate reduction with your existing lender may avoid some switching costs. Compare that offer against refinancing, including any product-switch fees and changes to features. The best option depends on your goals and eligibility, not simply the lowest advertised number.
Use our refinancing checklist to prepare your documents and questions.
Further reading
ASIC Moneysmart: mortgage switching calculator and switching home loans.
General information only, not personal financial, tax or legal advice. Examples are hypothetical. Rates, fees and lender policies vary. Credit is subject to assessment and approval.