Key takeaways:
Refinancing activity remains high, with owner-occupiers refinancing $41.9 billion to a new lender in the June quarter 2026.
Even a small rate difference could add up on a larger loan, the potential benefits depend on your loan size, costs and circumstances.
Reviewing your home loan does not necessarily mean refinancing. In some cases, negotiating with your existing lender may be worth exploring first.
The right move depends on your loan and your goals, rather than a blanket rule about rates, timing or fees.
Refinancing can be one way to make sure your home loan still suits you, but deciding whether to switch is not always as simple as finding a lower rate.
From how much equity you need to what happens to your credit score, there are plenty of refinancing myths that can make the decision harder than it needs to be.
To help separate some common refinancing myths from the facts, we spoke with two Aussie Brokers about what they are seeing with customers.
Myth vs fact, at a glance
Myth | Fact |
|---|---|
Refinancing only makes sense when rates are falling | Borrowers refinance for many reasons beyond rate changes, including consolidating debt, accessing equity or changing loan features |
A 0.1% rate difference is not worth refinancing for | On a larger loan, even a small rate difference may make a meaningful difference over time, depending on the costs involved |
Refinancing will damage your credit score | A refinance application may involve a hard credit enquiry, while multiple credit applications over a short period may have a greater impact |
You have to wait until your fixed term ends | You may be able to refinance early, but break costs can apply and should be considered first |
Refinancing resets your loan back to a full new term | Your new loan term forms part of the application and does not automatically need to reset to 30 years |
You need 20% equity to refinance | Having less than 20% equity does not necessarily prevent refinancing, although LMI may apply and your options may be more limited |
Myth: Refinancing only makes sense when interest rates are falling
Rate movements can be one reason to review your home loan, but they are not the only reason.
The RBA held the cash rate at 4.35% at its August 2026 meeting, its second consecutive hold. Borrowers are still refinancing in large numbers.
ABS Lending Indicators for the June quarter 2026 show owner-occupiers refinanced more than $41.9 billion in loans to a new lender over the quarter, alongside a further $24.8 billion refinanced internally with their existing lender.
Debbie Smith, Retail Broker at Aussie Mackay, says reviewing your loan does not necessarily mean switching lenders.
"Asking your lender for an interest rate review doesn’t mean you need to refinance," she said.
Debbie says she is also seeing lenders work hard to retain existing home loan customers, including by offering rate discounts.
"In the current market, lenders are fighting to keep their existing home loan customers. This means they are offering discounts to retain you," she said.
For borrowers on a fixed rate, the options may be more limited during the fixed period, so it is worth checking the terms of your loan and any potential break costs before making a change.
People also refinance for reasons beyond seeking a lower rate. These can include consolidating debt, accessing equity for renovations, changing repayment types or moving to a loan with features that better suit their circumstances, such as an offset account.
You might also be interested in: What the experts are predicting for the next RBA decision
Myth: A 0.1% rate difference is not worth refinancing for
Alexis Magri, Retail Broker at Aussie Ryde, has seen the misconceptions borrowers have about refinancing change over time.
Alexis says refinancing used to be seen as too complicated or paperwork-heavy, but that perception has shifted among many of his customers.
"I believe one of the biggest misconceptions around refinancing used to be that it was too complicated and a lot of paperwork," he said.
"But after COVID, where there were plenty of cashback offers, a lot of refinancing applications occurred. With lenders able to see repayment history through comprehensive credit reporting and digital signatures accepted in many states, customers started to realise it was quite straightforward."
Alexis says the hesitation he hears now is often about whether a relatively small rate difference is worth acting on.
"One of the biggest misconceptions borrowers have about refinancing nowadays has shifted towards them thinking, ‘oh it’s only 0.1% difference, it’s not worthwhile refinancing’," he said.
"This is definitely relative to their personal financial circumstances, as 0.1% could make a meaningful difference on a larger loan."
Alexis uses a $1 million, 30-year principal-and-interest loan as an example. At 6.19%, a 0.1 percentage point lower rate works out to roughly $65 a month difference in repayments.
As a general illustration only, if that repayment difference were instead paid back into the home loan, Alexis estimates it may save around $40,000 in interest over the life of the loan, assuming the rate remained unchanged.
He also uses a break-even point to help assess whether the costs of switching stack up.
"I normally aim for a six-month break-even point after costs," he said.
"Sometimes the smaller loans may not be worthwhile refinancing, as the costs to refinance may take years to recover before they start saving, but by that point there may be more suitable options."
Run the numbers on your own loan using a mortgage repayments calculator and compare any potential benefit with the costs of switching.
You might be interested in: Can you refinance if your home drops in value?
Myth: Refinancing will damage your credit score
Applying to refinance may involve a hard credit enquiry, which can affect your credit score.
Multiple credit applications over a short period may have a greater impact.
Alexis says he becomes more cautious when borrowers are applying frequently and also points to the costs that may come with switching repeatedly.
"Doing so every six to 12 months means they may be paying almost $1,000 to $2,000 in refinance costs per year depending on the lenders and state government fees involved," he said.
"These fees may vary."
Those costs can include lender discharge fees, government mortgage registration or transfer fees and fees charged by the new lender. The actual cost will depend on the loan, lender and state or territory.
As part of his ongoing home loan health reviews, Alexis says he checks whether clients’ rates remain competitive and starts by looking at the existing lender.
"I would start off by negotiating with their existing bank first and only if there happens to be a better suited lender, then I would let the client know of any other lenders’ options available," he said.
That approach does not always end in a refinance.
"Even after three to four years, I have clients currently still with the same bank as they remain on a competitive rate due to my process above," he said.
Myth: You have to wait until your fixed rate term ends
You may be able to refinance out of a fixed rate loan before the term ends, but it is important to understand the costs first.
Break costs may apply if you exit a fixed rate loan early. The amount can vary depending on factors such as how much time remains on the fixed term and how interest rates have moved since you fixed.
Whether it makes sense to switch early will depend on the break cost and the potential benefit of refinancing.
An Aussie Broker can help you understand the potential costs before you decide.
You might also be interested in: Refinancing is evolving: Australians are doing more than just switching rates
Myth: Refinancing means starting your loan term over from scratch
Refinancing means taking out a new loan, but that does not automatically mean returning to a 30-year term.
The term available will depend on the new lender’s criteria and your circumstances.
Debbie flags extending the loan term as one of the refinancing mistakes she sees most often.
"Refinancing too often and continuing to extend the term of your home loan to 30 years is a mistake many borrowers make," she said.
"The goal for most homeowners is to repay their home loan as quickly as possible. By refinancing too often and extending the loan term, borrowers are paying additional interest and essentially going back to square one."
Extending the loan term may reduce repayments in the short term, but it can also increase the total amount of interest paid over the life of the loan.
It is worth discussing the loan term as part of the refinance process and checking it carefully in the loan documents before proceeding.
Myth: You need at least 20% equity to refinance
Having 20% equity may help you avoid Lenders Mortgage Insurance (LMI), on a new loan, but having less than 20% equity does not necessarily prevent you from refinancing.
LMI may apply again if your equity is below the lender’s required threshold, and your refinancing options may be more limited.
Your borrowing capacity, income, expenses, existing debts, credit history and the lender’s own criteria will also influence the options available.
An Aussie Broker can help you understand which options may be realistic based on your current position.
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When might refinancing leave you worse off?
There’s no one-size-fits-all answer to whether you should refinance your home loan.
A lower rate can matter, but it’s only part of the picture. Your loan balance, remaining term, fees, equity, loan features and how long it may take to recover the costs of switching can all affect whether refinancing stacks up.
And as the examples above show, reviewing your loan does not always mean changing lenders. Sometimes your existing lender may be able to offer a more competitive rate, while in other cases comparing the market may uncover an option that better suits your needs.
For Alexis, the starting point is understanding what a customer already has before looking elsewhere.
"I would start off by negotiating with their existing bank first and only if there happens to be a better suited lender, then I would let the client know of any other lenders’ options available," he said.
The key is to make the decision based on your own loan and circumstances, rather than assumptions about how much of a rate difference is worthwhile or when you should refinance.
An Aussie Broker can review your current home loan, help you understand the costs of switching and compare your options, including whether staying with your existing lender may make sense.
