What is home loan refinancing?
Last updated: 31 March 2025 | Estimated read time: 7 Minutes
Navigate this article
What is refinancing? | Why refinance | When to refinance | What could refinancing do? | Steps to refinance | Benefits of refinancing | Considerations before refinancing
What is home loan refinancing?
Why refinance?
Depending on your financial goals, there are various reasons that could make refinancing seem like an enticing option. For example:
Lower interest rates
One of the main reasons to refinance is to take advantage of lower interest rates, which can save you money over the life of the loan. If you’ve found a lower interest rate and have reviewed the comparison rate against their existing rate, as well as considering any break fees or other costs associated with switching loans. Even a 0.5% reduction could save a significant impact over the life of the loan – but make sure you’re looking at all the information so you can make an informed decision that will meet your needs.
Accessing equity
Refinancing can allow you to access the equity in your home for renovations, investments, or other financial needs. Depending on your overall financial situation, this could potentially be used to finance an investment property, or even finance some overdue home renovations. You’ll also continue to just make the one loan repayment. But remember, it’s important to plan your renovation before booking the tradies in. Find out more about using the equity in your home.
Consolidating debts
Consolidating outstanding loans could be a good way to save on interest, as having to pay multiple (often higher) interest rates can really add up. It could also reduce the number of monthly repayments, which can make making repayments on time easier to manage. Make sure you read all your existing loan information to make sure you know and factor in any break costs for the loans you’re thinking of consolidating. A word of caution though – if you have a large credit card debt, remember that refinancing isn’t a magic way to ‘fix’ your spending habits.
Better loan features
Access features like an offset sub-account or flexible repayment options that better meet your needs. An offset sub-account or a variant of this (the name and offering may differ between lenders) might help if you have any funds accumulated, as these can be placed in this account to help reduce the daily interest calculated on an outstanding loan balance. Different lenders and loan products may also offer different repayment options, or things like a direct line of contact for more support and customer service.
When to refinance
There is no set time of when you can refinance, however here are a few considerations that could mean it’s time to freshen up your home loan.
Market conditions
Financial changes
Loan features
Life changes
What could refinancing do for me?
Depending on your situation, refinancing could help you save money through a lower interest rate or by saving on overhead fees charged by other lenders. Refinancing can also be a strategy used to free up the equity you have in your home. That means tapping into what you own as value in the property to do other things, like realise your property investment goals, renovate the house, or even buy a boat or caravan – it could give you lots of options.
Refinancing your home loan may allow you to switch between a variable and a fixed rate home loan. With a fixed rate loan, your payment amount stays the same for a set period, regardless of market changes – so you can rely on the amount you have budgeted for loan repayments. Or you may decide to take advantage of lower interest rates that may come with variable rate mortgages along with the risk that rates may rise in future.
Steps to refinance your home loan
Evaluate your current loan
Compare new loans
Apply for the new loan
Settle the new loan
Monitor your new loan
How to refinance your home loan
Refinancing your home loan can be a smart financial move, but understanding the process is key to making the right choices. Our refinancing guide will walk you through the steps you need to take when refinancing your home loan.
Possible benefits of refinancing
Cost savings
Improved loan features
Financial flexibility
Simplified finances
Considerations before refinancing
Lenders Mortgage Insurance (LMI)
It’s possible that some people may have to pay a risk fee that their chosen lender requests, to offset the risk or otherwise protect the lender. For example, a Lenders Mortgage Insurance (LMI) fee will most likely be required where the amount you borrow is above 80% of the property’s value.
Upfront and ongoing fees
There may be costs involved with refinancing and switching lenders or products. Ranging from loan application fees with your new lender, to a discharge fee with your outgoing lender, and even property valuation and risk fees - refinancing isn’t as straightforward as changing your direct debit details. So before you go and refinance to save a few basis points off of your existing interest rate, make sure you read the terms of your current loans carefully (including break fees, interest rates, comparison rates etc.) and weigh these up against the features of any refinance options you’re considering, including the loan term. Learn more about what fees to expect when refinancing.
Credit score impact
Multiple applications can affect your credit score.
Long-term financial goals
Ensure refinancing aligns with your long-term financial plans.
Refinancing with repayments in arrears
This is a conversation best had with a lender, or potentially a licensed financial or tax advisor depending on your circumstances. Not all lenders will consider applications if an applicant has fallen behind on mortgage repayments, has a poor credit score or previous bankruptcy, or defaulted on a debt. The good news? We may be able to help with refinancing even if you’re in arrears.
Want to know more? We’re here to help.
Refinancing a home loan doesn’t have to be complicated. You can apply online with Pepper Money in less than 20 minutes if you are an eligible customer with PAYG Income.
If you're self-employed or just prefer to speak to one of our friendly lending specialists, then submit an online enquiry or call our team on 137 377.
Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending
Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.
Want to find out where you stand?
Sign up to our newsletter
If you like this article, you'll love our monthly Real Lives newsletter.
View our Privacy Policy
Need some help with your refinancing?
There's a lot refinancing can do; from unlocking your equity to consolidating debts in to your home loan.
Some great resources are here to help you understand your options.
Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
All applications for credit are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply.
The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.
Pepper Money Personal Loans is a brand of Pepper Money Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030. Personal information for Pepper Money Personal Loans is collected, used and disclosed in accordance with Pepper’s Privacy Policy & the credit provider’s Privacy Policy.
Pepper Money Limited ABN 55 094 317 665; AFSL and Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.
Pepper and the Pepper Money logo are registered trademarks of Pepper Group Assets (Australia) Pty Limited and are used under licence.
