Key takeaways:
Refinancing could reduce borrowing costs by accessing a more competitive interest rate or consolidating eligible debts, subject to lender approval.
Lower repayments don't always mean lower costs. Extending your loan term could increase the total interest paid, even with a lower rate.
Paying down your mortgage can help build equity faster. Principal and interest repayments, offset accounts and extra repayments may help reduce your outstanding balance.
Refinancing fees can offset potential savings. Compare switching costs, interest rates, loan features and repayment terms before deciding.
You don't always need to refinance to pay off debt sooner. Extra repayments, changing your repayment frequency or negotiating with your current lender may help.
Refinancing your home loan could help lower interest costs, manage debt and build equity faster. But lower repayments don't always mean long-term savings.
Your loan term, interest rate, fees and repayment strategy all affect the outcome.
With the Reserve Bank of Australia raising the cash rate to 4.85% in November 2026, homeowners may be reviewing their mortgage and other debts to manage rising costs.
This guide explains how refinancing works, compares repayment and interest costs, and outlines strategies that could help you pay down your mortgage sooner.
What does it mean to refinance your home loan?
Refinancing means replacing your existing home loan with a new one, either with your current lender or a different lender. It could help you access a lower interest rate, different loan features or a repayment structure that better suits your circumstances.
Common reasons to refinance your home loan include:
Lower interest costs: A more competitive rate could reduce your repayments or total interest paid, depending on the loan term and fees.
Access different loan features: Offset accounts, redraw facilities and flexible repayments may help you manage interest costs and pay down your mortgage faster.
Change your loan structure: Refinancing may allow you to consolidate eligible debts, adjust your repayments or access available equity, subject to lender approval.
Refinancing generally involves a new loan application, with the lender assessing your income, expenses, existing debts, credit history and property value.
Before switching, compare your current loan with the new loan's interest rate, fees, features and repayment costs. A lower monthly repayment doesn't mean a cheaper loan, particularly if you extend the loan term.
How can refinancing help you reduce debt?
Refinancing to consolidate debt could help lower interest costs and simplify repayments by combining eligible debts into your home loan. However, the potential savings depend on the interest rate, repayment term and refinancing fees.
Can you consolidate credit cards, personal loans and car loans?
Some lenders allow you to consolidate credit card debt, personal loans and car loans into your mortgage, subject to available equity and lending criteria.
This increases your home loan balance to pay off those debts, potentially leaving you with fewer repayments to manage.
While debt consolidation may reduce monthly repayments, extending the debt over a longer mortgage term could increase the total interest paid.
Example: How much could debt consolidation cost?
Say you have:
$10,000 in credit card debt at 18% p.a.
$10,000 in personal loan debt at 14% p.a.
Both debts have five years remaining. You're considering consolidating the $20,000 into your mortgage at a hypothetical interest rate of 6.5% p.a.
Here's how different repayment strategies compare:
Repayment option | Monthly repayment | Total interest | Time to repay |
|---|---|---|---|
Keep both debts | $487 | $9,200 | 5 years |
Consolidate over 30 years | $126 | $25,500 | 30 years |
Consolidate over 5 years | $391 | $3,500 | 5 years |
Consolidate and maintain $487 repayments | $487 | $2,700 | Approx. 3 years, 11 months |
Illustrative examples only. Calculations assume monthly principal and interest repayments, constant interest rates and no fees, charges or additional borrowing. The $20,000 is modelled separately from the existing mortgage. Figures are rounded and do not represent an available loan product or offer.
The key takeaway: Consolidating $20,000 over 30 years could reduce monthly repayments to around $126, but increase total interest to approximately $25,500. Repaying the same amount over five years could reduce interest costs significantly under these assumptions.
Where affordable, maintaining higher repayments or using a shorter loan term could help reduce total interest. Some lenders may offer a separate loan split for consolidated debt, subject to their lending criteria.
Use Aussie's mortgage repayment calculator to estimate repayments, or speak with an Aussie Broker about your debt consolidation options.
Important information: Calculations are illustrative only and do not account for individual financial circumstances, lender fees or changes in interest rates. Applications are subject to lender assessment and approval. Actual costs and outcomes will vary.
You might also be interested in: Consolidating personal debt: Credit cards, car loans and more
What are the risks of consolidating debt into your home loan?
Debt consolidation can simplify repayments, but it doesn't reduce the amount you initially owe. It changes how you finance your debts, which can add costs and risks.
Before refinancing to consolidate debt, consider:
Putting your home at risk: Previously unsecured debts, such as credit cards and personal loans, become secured against your property. If you can't meet repayments, your home could be at risk.
Paying more interest: Extending short-term debt over 20 or 30 years could increase total interest costs, even with a lower rate.
Accumulating more debt: Continuing to use credit cards after consolidation could leave you with a larger overall debt balance.
Refinancing debts nearly paid off: Moving debts with only a few repayments remaining into a longer mortgage term could increase their cost.
Sharing debt responsibility: With a joint mortgage, both borrowers may become liable for consolidated debts originally held by one person.
Refinancing fees, potential break costs and changes to your loan terms can also affect the overall benefit. Before proceeding, compare the total cost of keeping your existing debts against consolidating them, including how quickly you could repay each option.
What if you're already struggling to make repayments?
If you're struggling with your repayments, contact your lender's financial hardship team early. Depending on your circumstances, they may offer temporary repayment reductions, payment pauses or other hardship arrangements.
Refinancing may not be suitable or available if you can't meet your existing repayments.
For free, confidential financial counselling, contact the National Debt Helpline on 1800 007 007. ASIC's Moneysmart also guides you on managing mortgage repayment difficulties.
How can refinancing help you build equity faster?
Refinancing could help you build equity faster by switching to principal and interest repayments or accessing loan features that reduce interest costs.
Paying down your mortgage increases your equity, although changes in property value also affect how much equity you hold.
Does switching from interest-only to principal and interest build equity?
Yes. Switching from interest-only to principal and interest repayments means you start reducing your outstanding loan balance rather than paying interest alone. This can help you build equity faster, as long as your property's value doesn't decline.
Example: Interest-only vs principal and interest repayments
Assume you have a $500,000 home loan at a hypothetical interest rate of 6.5% p.a., with 25 years remaining.
Monthly repayment | $2,708 | $3,376 |
Loan balance after 5 years | $500,000 | $452,811 |
Principal repaid over 5 years | $0 | $47,189 |
Illustrative example only. Assumes a constant interest rate of 6.5% p.a., monthly repayments, no fees or additional repayments, and a 25-year principal and interest term. The interest-only balance remains unchanged. Figures are rounded and illustrative only.
In this example, principal and interest repayments cost approximately $668 more per month but reduce your loan balance by around $47,200 over five years. This would increase your equity by the same amount if your property's value remained unchanged.
Interest-only periods typically have a fixed duration.
When they end, repayments generally increase because you must repay the outstanding balance over the remaining loan term.
Learn more about switching from interest-only to principal and interest repayments, or speak with an Aussie Broker about your repayment options, subject to lender assessment.
You might also be interested in: Types of home loans in Australia: How to compare your options
How do offset accounts and redraw facilities help you pay off your loan sooner?
Offset accounts and redraw facilities can help reduce home loan interest, potentially allowing you to pay down your mortgage faster. However, they work differently.
A linked transaction account that offsets eligible funds against your mortgage balance when calculating interest. | A loan feature that may allow you to access extra repayments you've made towards your mortgage. |
Funds generally remain accessible through the linked account. | Access to extra repayments depends on lender conditions, limits and potential fees. |
Example: How much interest could an offset account save?
Say you have a $500,000 mortgage at 6.5% p.a. and maintain $20,000 in a 100% offset account. Interest would be calculated on $480,000 instead of $500,000, potentially reducing interest charges by approximately $1,300 over one year, assuming the rate and offset balance remain unchanged.
If your repayments stay the same, more of each repayment could go towards reducing your principal, helping you pay off your home loan sooner.
However, offset accounts may attract additional fees or higher interest rates, while redraw facilities can have withdrawal restrictions. Compare the potential savings against the costs and conditions before refinancing.
Learn more about how offset accounts work, or ask an Aussie Broker to help you compare home loan features.
What is home equity, and how much can you use?
Home equity is the difference between your property's current market value and your outstanding mortgage balance. It can increase as you repay your loan or if your property's value rises. For example, if your home is worth $700,000 and you owe $500,000, you have approximately $200,000 in equity.
However, your total equity isn't necessarily the amount you can borrow. Lenders assess your loan-to-value ratio (LVR), income, expenses and other lending criteria to determine how much additional borrowing may be available.
Some lenders allow borrowing up to 80% of a property's value without lenders mortgage insurance (LMI), subject to eligibility. Borrowing above this threshold may attract LMI or additional conditions.
Example: How much usable equity could you have?
Calculation | Amount |
|---|---|
Property value | $700,000 |
80% of property value | $560,000 |
Outstanding mortgage | $500,000 |
Potential usable equity at 80% LVR | $60,000 |
In this example, you could have approximately $60,000 in usable equity, subject to lender valuation, borrowing capacity and approval.
Want to check how much equity you could have?
Use Aussie's home value calculator to estimate your property's current value and explore your potential equity. Online estimates aren't formal valuations, and property values can rise or fall. An Aussie Broker can help you understand your equity position and assess your borrowing options based on your circumstances.
You might also be interested in: Refinancing your home loan to access equity
What does it cost to refinance, and what do lenders check?
Refinancing involves potential fees and a new lending assessment. Before switching, compare the total cost of your current and proposed home loans, and check whether you meet the new lender's borrowing criteria.
What refinancing costs should you expect?
Refinancing costs vary by lender and loan product. Some fees may be waived, but others can reduce or outweigh the potential savings from a lower interest rate.
Common costs include:
Refinancing cost | When it may apply | What to check |
|---|---|---|
Discharge fee | When closing your existing mortgage. | Confirm the fee with your current lender. |
Application or settlement fees | When establishing your new loan. | Check upfront and ongoing charges. |
When refinancing before a fixed rate period ends. | Request an estimate, as costs can be significant. | |
If your new loan exceeds the lender's LVR threshold. | Check whether LMI applies, even if you've previously paid it. | |
When the new lender requires a valuation. | Confirm whether it's included or charged separately. | |
When leaving a loan with an existing cashback offer. | Check whether early refinancing triggers repayment conditions. |
Government mortgage registration fees and other state or territory charges may also apply.
The key is to compare total costs, not just interest rates. A lower rate may reduce interest charges, but switching fees and a longer loan term could offset those savings.
Compare upfront costs, ongoing fees, repayments and total interest over the period you expect to hold the loan. You can also explore Aussie's guide to common refinancing considerations.
What will lenders look at when you refinance?
Refinancing requires a new assessment of your ability to repay the proposed loan, even if you've consistently met your existing mortgage repayments. Lenders generally assess:
Income and employment: Your earnings, employment type and income stability.
Living expenses: Regular household spending and financial commitments.
Existing debts: Personal loans, car loans, credit card limits and other liabilities.
Credit history: Your credit report, repayment history and existing credit accounts.
Property value and LVR: The property's assessed value relative to your proposed loan amount.
Loan serviceability: Your ability to afford repayments, including under higher interest rate assumptions.
Under APRA's mortgage serviceability requirements, APRA-regulated banks must generally assess new borrowers using an interest rate at least three percentage points above the loan's interest rate. APRA confirmed in May 2026 that this buffer would remain at three percentage points.
For example, a home loan with an interest rate of 6.5% p.a. would generally be assessed at at least 9.5% p.a. This is an assessment rate, not necessarily the rate you'd pay.
If you're refinancing to consolidate debt or access equity, increasing your loan balance may affect your borrowing capacity. Having substantial equity or a strong repayment history doesn't guarantee approval.
What other ways can you build equity and reduce debt faster?
You don't always need to refinance to pay down your mortgage faster. Extra repayments, changing your repayment frequency and reviewing your loan structure could help reduce interest costs and build equity, depending on your loan terms and circumstances.
Here are four strategies to consider.
1. Make extra repayments
Paying more than your minimum mortgage repayment reduces your outstanding loan balance, potentially saving interest and shortening your loan term.
Example: What difference could an extra $50 a week make?
Assume you have a $500,000 principal and interest home loan at 6.5% p.a., with 30 years remaining. Making an additional $50 repayment each week could:
Save approximately $125,300 in total interest.
Help you pay off your mortgage around five years sooner.
Example only. Calculations assume monthly repayments, with $50 per week converted to approximately $216.67 per month, a constant interest rate of 6.5% p.a. and no fees or changes to scheduled repayments. Actual savings depend on lender calculations and repayment timing.
Some fixed rate loans restrict extra repayments or charge break costs. Check your loan conditions before making additional payments.
Use Aussie's extra repayments calculator to estimate how much you could save.
You might also be interested in: Extra repayments: How to pay off your home loan sooner
2. Switch to fortnightly repayments
Switching from monthly to fortnightly repayments could help you pay off your mortgage sooner, depending on how your lender calculates repayments.
For example, on a $2,000 monthly repayment:
Monthly: $2,000 × 12 = $24,000 per year.
Fortnightly: $1,000 × 26 = $26,000 per year.
Paying half your monthly repayment every fortnight means making the equivalent of one extra monthly repayment each year.
However, some lenders divide your annual repayment amount into 26 equal fortnightly payments, which doesn't provide the same benefit.
Check how your lender calculates repayments before switching.
You might also be interested in: 8 tips to potentially pay off your home loan faster
3. Split your home loan
A split home loan divides your mortgage between fixed and variable interest rates, offering a combination of repayment predictability and flexibility.
Fixed portion: Provides a set interest rate for an agreed period, although extra repayments may be restricted.
Variable portion: Interest rates can rise or fall, but some loans offer flexible repayments, offset accounts or redraw facilities.
Splitting your loan won't automatically reduce interest costs. The potential benefits depend on the interest rates, fees, loan features and how you manage repayments.
An Aussie Broker can help you compare fixed, variable and split home loan options based on your circumstances.
You might also be interested in: Types of home loans in Australia: How to compare your options
4. Review your home loan regularly
Interest rates, loan features and your financial circumstances can change. Reviewing your mortgage periodically can help you identify opportunities to reduce costs or pay off your loan sooner. Check:
Interest rate: Is your current rate competitive with similar loans?
Fees and features: Are you paying for features you don't use?
Remaining loan term: Does your repayment schedule align with your goals?
You could also ask your existing lender for a lower interest rate before refinancing. Some lenders may offer a rate reduction or alternative loan product, subject to their conditions.
Learn more about negotiating a lower home loan rate and ways to pay off your mortgage sooner.
What mistakes should you avoid when refinancing?
Refinancing can reduce interest costs or offer more suitable loan features. However, overlooking fees, loan terms or lender requirements could leave you paying more over time. Here are five common refinancing mistakes to avoid:
Comparing interest rates alone: A lower rate doesn't necessarily mean a cheaper loan. Compare interest rates, comparison rates (where applicable), fees, features and total repayment costs.
Overlooking the break-even point: Refinancing fees can offset potential savings. Calculate how long it would take for interest savings to recover your switching costs, particularly if you plan to sell or refinance again soon.
Making multiple loan applications: Formal credit applications may appear on your credit report. Multiple enquiries in a short period could affect how lenders assess your application. Compare options before applying.
Choosing unsuitable loan features: Limited extra repayments, restricted redraw access or missing offset facilities could affect your repayment goals. Check the loan's features and conditions before switching.
Assuming approval or advertised rates are guaranteed: Your eligibility and offered interest rate depend on your financial circumstances, loan details and lender criteria. Not every borrower qualifies for advertised rates.
The key takeaway: Look beyond the advertised rate. Compare total borrowing costs, loan features and repayment flexibility before refinancing.
Is refinancing right for you?
Refinancing could help lower borrowing costs, reduce debt or support your equity goals. But whether it's worthwhile depends on the new loan's total costs, terms and suitability for your circumstances. Before switching, ask yourself:
Will refinancing save me money? Compare potential interest savings against switching fees, ongoing charges and total borrowing costs.
Does the loan term support my goals? Extending your mortgage could lower repayments but increase total interest paid.
Can I afford the repayments? Consider how higher interest rates, unexpected expenses or income changes could affect your budget.
How will I use any repayment savings? Maintaining higher repayments, where affordable, could help you pay off debt faster.
Does the loan offer the features I need? Check repayment flexibility, offset facilities, redraw access and any restrictions.
An Aussie Broker can help you review your existing mortgage, compare options and understand how different rates, fees and loan terms could affect your repayments.
Whether you're looking to reduce debt or build equity faster, book a free^ chat with an Aussie Broker to explore your refinancing options.
Ready to review your refinancing options?
Refinancing may help reduce borrowing costs or build equity faster by changing your interest rate, loan structure or repayment strategy. However, the benefits depend on your loan terms, refinancing fees and how you manage repayments.
An Aussie Broker can help you review your existing mortgage, compare refinancing options and understand the potential costs and benefits for your circumstances.