Cost to Refinance a Home Loan, and When It Pays

The headline rate is the wrong place to start. What decides whether refinancing is worth it is how long the lower repayments take to pay back what the switch costs, and that break-even can be four months or four years on the same rate cut. It depends almost entirely on costs most people don’t add up until they’re halfway through the paperwork.

With the Reserve Bank lifting the cash rate to 4.60% from 30 September 2026, plenty of borrowers are about to look at their rate again, and a good few will be offered a lower one by a lender they’ve never dealt with. This guide is about doing that sum properly before anyone signs anything.

What refinancing actually costs

Some of the costs are small and fixed. In NSW, Land Registry Services charges $182.73 to register the discharge of your old mortgage and the same again to register the new one, GST included, on fees that apply from 1 July 2026. Your old lender charges a discharge fee too; CommBank’s is $350 on its schedule effective September 2026. The new lender may add an application fee or a valuation fee, and many waive both.

Two costs can be large. If you’re on a fixed rate, breaking it early can mean a break fee, and Moneysmart’s warning is blunt: the break fee may be very high, especially when rates have fallen since you fixed. And if you have less than 20% equity, you might have to pay lenders mortgage insurance again on the new loan, which can wipe out years of saving on its own. Moneysmart suggests asking the old lender for a partial refund of the LMI you paid the first time, which costs nothing to ask about. Check both before you start.

Only your lender can calculate a break cost, and it moves with wholesale rates, so get it in writing with the date it’s valid until. Our refinance calculator won’t estimate it for you, on purpose.

The costs people forget

The valuation is the one that surprises people. The new lender values the home itself, and if its figure comes in lower than you expected, your LVR can land above 80% and bring LMI into a switch that looked clean on paper. Ask what value the new lender is likely to use before you apply, not after.

Then there are the small frictions. Direct debits and salary credits have to move, an offset account at the old lender closes with the loan, and a redraw balance you’ve been treating as savings disappears into the payout figure unless you take it out first. None of these cost much on their own. They cost time, and time is when people give up halfway through and pay the old rate for another year.

Break-even, not the rate, is the number

The sum itself is simple. Add up every cost, take off any cashback, and divide by how much less you’ll repay each month. That’s how many months the switch takes to pay for itself.

Keep the term the same when you compare. Stretching the loan back out to a fresh full term makes the new repayment look much lower, but you pay interest for years longer to get it, and a comparison built that way flatters every switch.

A hypothetical, run through the calculator

Here’s a hypothetical, with invented round numbers, run through our refinance calculator. A $600,000 variable loan with 25 years left at 6.24%, and an offer at 5.74%. The repayment falls by about $183 a month. With the $350 discharge fee and $365.46 of NSW registration fees, and nothing else, the switch pays for itself in four months and leaves them about $10,300 ahead after five years, owing about $3,900 less as well. That’s the kind of switch worth doing.

Now make it a fixed loan with an $8,000 break cost. Same rate, same saving. The break-even moves out to four years, and after one year they’re about $6,500 behind.

Ask your current lender first

It costs nothing and it often works. Moneysmart’s advice is to tell your current lender you’re planning to switch to a cheaper loan elsewhere, because it may cut your rate to keep your business. If it matches the offer, you’ve saved the whole cost of switching, and the break-even is day one. Ring them before you apply anywhere.

The gap between old and new customers is smaller than it was, which makes this conversation easier. The RBA found the spread between the average outstanding and average new variable rate had narrowed to just 4 basis points by May 2026. Averages hide a lot, though, and Moneysmart notes the market can have more than 2% between variable rates. An average borrower isn’t paying much of a loyalty tax. Plenty of individual ones still are.

Cashback against rate

Cashbacks are back on some lenders’ pages, with conditions attached. ME Bank, for example, offers $2,000 on an eligible refinance with an LVR above 80% and a loan of at least $400,000, for applications between 18 August 2026 and 28 February 2027 that settle within 120 days. Offers like it usually set a loan size and an LVR band, and some take part of the cashback back if you leave early. The RBA noted that cashback incentives eased from 2023 onwards after a period when deals of up to $5,000 were common.

Our view, which the lenders running those offers won’t love: a cashback is usually the weakest reason to move. It’s a one-off, while on a hypothetical $600,000 loan a rate that’s 0.10% higher costs about $600 in the first year alone and keeps costing every year after, so a $2,000 cashback on a slightly dearer loan can be behind within three or four years. Put the cashback into the calculator as a reduction in costs, set the rates honestly, and let the break-even and the five-year column settle it.

Some refinances are really about something else. Rolling a car loan or credit card into the mortgage cuts the repayment because the debt is spread over decades. The interest you pay over that time can end up higher than on the original loan, even at a lower rate. If that’s part of the plan, compare total interest rather than the monthly figure.

When a switch isn’t worth it

A break-even beyond two years is where we start asking hard questions. Rates, your income and your plans all have time to change before you’re ahead, and if you sell or refinance again before then, you’ve paid to move for nothing.

Switching within your own lender is the other option. Moneysmart notes lenders can charge a switching fee to move you to a different product with them, which is often far cheaper than a full refinance with a new valuation and two lots of government fees. It’s worth one phone call before any paperwork.

Sina will also tell you when we can’t help. If a break cost is the problem, no broker can make it go away; waiting for the fixed term to end is usually cheaper than paying it, and we’ll say so even when it means there’s no loan for us to write today. And because a refinance pays us a commission from the new lender, you should expect us to show you the numbers rather than ask you to trust the enthusiasm. Our refinancing page covers how we run a switch once the sums say it’s worth doing.