Yes, you can refinance to get a lower interest rate, and for most borrowers with reasonable equity, it's one of the most direct ways to reduce monthly repayments.
The question isn't really whether you can refinance for a lower rate. It's whether the savings justify the time and cost involved. Lenders are competing for customers, and if your current rate sits above what's available in the market, you're likely paying more than you need to. But refinancing comes with application work, valuation costs, and sometimes discharge fees from your existing lender. Those costs need to be outweighed by what you'll save over the next few years.
How Much Difference Does a Rate Reduction Make
Even a small reduction in your interest rate compounds over time. A drop of just 0.25% on a $500,000 loan can reduce your monthly repayment by roughly $75, which adds up to around $900 a year. Over five years, that's $4,500 saved without changing your loan term or making extra payments. A reduction of 0.50% or more doubles that figure.
The larger your loan balance and the longer you plan to stay in the property, the more impact a rate reduction will have. If you're a few years into a 30-year loan and your rate is still sitting at what you locked in originally, there's a strong chance the market has moved on without you.
What Lenders Look at When You Apply to Refinance
Lenders assess refinance applications the same way they assess new purchases. They'll review your income, employment stability, credit history, and the current value of your property. The difference is that you're not competing for a property, so the process tends to move faster once your documentation is in order.
Equity is the main factor that determines whether refinancing is straightforward. If your property has increased in value or you've paid down your loan, you're in a stronger position. Lenders generally want to see at least 20% equity to avoid lender's mortgage insurance, though some will refinance with less if your income and credit are solid. If your property is in Mount Eliza, where values have held well in recent years, you may find your equity position is stronger than it was when you first bought.
Your current lender has no obligation to offer you their lowest rates just because you've been a customer for years. New borrowers often get access to discounted rates that existing customers don't see unless they ask or threaten to leave. That's not a quirk of one bank, it's standard across the industry.
Fixed Rate Break Costs and Exit Fees
If you're currently on a variable rate, switching lenders is usually straightforward. If you're on a fixed rate and want to refinance before the fixed term ends, you'll likely face break costs. These are calculated based on the difference between your fixed rate and the current wholesale cost of funding for the remaining term. If rates have dropped since you fixed, the break cost can be substantial, sometimes tens of thousands of dollars.
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Most lenders also charge a discharge fee to close your loan, typically between $150 and $400. Some will waive application fees if you're refinancing to them, but not all. It's worth asking what the total cost to switch will be before you commit, including valuation fees and any government charges if applicable in your state.
Consider a borrower with two years left on a fixed rate of 4.5%, looking to refinance to a variable rate of 3.8%. If the break cost is $8,000 and the monthly saving is $200, it would take 40 months to recover the break cost alone. In that scenario, waiting until the fixed term ends and then switching makes more sense. If the break cost is only $1,200 and the saving is the same, you're ahead within six months.
When Refinancing for a Lower Rate Makes Sense
Refinancing works when the numbers stack up and your situation is stable. If you've been in your current role for at least six months, your credit file is clean, and your property value hasn't dropped, most lenders will be happy to compete for your business.
It makes less sense if you're planning to sell within the next 12 months, or if your employment or income has recently changed in a way that might complicate your application. Self-employed borrowers can still refinance without issue, but you'll need recent financials and tax returns ready to go.
Some borrowers refinance not just for a lower rate, but to access equity for renovations, investment, or debt consolidation. If that's part of your plan, the loan structure and features matter as much as the rate itself. A slightly higher rate with an offset account and no restrictions on extra repayments might serve you longer than the absolute lowest rate with limited flexibility. You can read more about how refinancing works and what it involves on our refinancing page.
How to Compare Rates Without Missing the Details
Advertised rates are a starting point, not a guarantee. The rate you're offered depends on your loan-to-value ratio, your deposit or equity, and sometimes your profession or the lender's appetite for your postcode. A rate advertised at 3.5% might only apply to borrowers with 30% equity and a loan above $500,000.
Comparison rates are designed to account for fees and help you see the true cost, but they assume a $150,000 loan over 25 years, which doesn't reflect most refinance situations. They're still useful for spotting lenders that load up on fees, but they won't tell you what you'll actually pay.
The other detail that catches people out is ongoing fees. A loan with a slightly higher interest rate but no monthly account-keeping fee can end up costing less annually than a loan with a rock-bottom rate and a $395 annual fee. Run the numbers on your actual loan balance and intended loan term, not the advertised scenario.
If you've got a loan over $600,000 and strong equity, you're in the bracket where lenders will negotiate. Rates aren't always fixed. A broker can often secure a discount that isn't available to someone applying directly, particularly if you're refinancing a larger balance or bringing multiple loans across. We work with borrowers across Australia, including Mount Eliza, and can show you what's available based on your actual position. You can book an appointment to talk through your options without any obligation.
What Happens After You Apply
Once you submit a refinance application, the lender will order a valuation of your property. This usually costs between $200 and $400, depending on the property type and location. The valuation determines how much equity you have and whether the lender is comfortable with the loan amount you're requesting.
If the valuation comes in lower than expected, the lender may ask for a larger deposit or reduce the loan amount they're willing to offer. If it comes in higher, your equity position improves and you might qualify for a lower rate tier.
Approval times vary, but most refinances are assessed within a week if your documentation is complete. Settlement usually happens within four to six weeks of approval, though it can be faster if there are no complications. Your new lender will handle the payout of your existing loan and arrange for the title to be transferred. You don't need to do much beyond signing the forms and making sure your direct debits are updated once the new loan is active.
Call one of our team or book an appointment at a time that works for you. We'll review your current loan, show you what rates are available, and calculate whether refinancing makes sense based on your actual repayments and costs.
Frequently Asked Questions
Can I refinance to get a lower interest rate?
Yes, you can refinance to secure a lower interest rate if your equity and financial position are strong enough to meet lender criteria. The savings need to outweigh the costs of switching, including any discharge fees or break costs if you're on a fixed rate.
How much can I save by refinancing to a lower rate?
A 0.25% reduction on a $500,000 loan saves around $75 per month or $900 per year. A 0.50% reduction doubles that figure, and the savings compound over the life of the loan.
What costs are involved in refinancing for a lower rate?
You'll typically pay a discharge fee to your current lender, a valuation fee to the new lender, and possibly application or settlement fees. If you're exiting a fixed rate early, break costs can add thousands to the total cost.
Do I need 20% equity to refinance?
Most lenders prefer at least 20% equity to avoid lender's mortgage insurance, but some will refinance with less if your income and credit history are solid. Your equity position depends on your current property value and how much you've paid off.
How long does it take to refinance?
Most refinance applications are assessed within a week if your documentation is ready. Settlement usually happens within four to six weeks of approval, though it can be faster depending on the lender and your circumstances.
