How to refinance a home loan, from loan check to settlement day

Refinancing a home loan means paying out your current mortgage with a new loan, either a different product at the same lender or a loan from a new lender. Moneysmart calls the first option refinancing internally, where you stay with your current lender but switch to a different loan, and notes that it can carry a switching fee. An external refinance replaces the lender as well: the new lender pays out the old loan, the old mortgage is released and a new mortgage is registered over the property.

People refinance for a handful of reasons: a rate that has drifted above what new customers are offered, a fixed term coming to an end, equity to release for renovations, other debts to consolidate, or a borrower to add or remove. Moneysmart suggests telling your current lender you plan to switch, because to keep your business the lender may reduce the rate on your current loan. That conversation costs nothing and gives a baseline for every other quote. This guide is general information about the process, not advice on whether refinancing suits your circumstances.

An external home loan refinance, where a new lender pays out the old loan, follows six steps, and each one depends on the step before it. An internal refinance stays with the current lender on a different loan and, as Moneysmart notes, may carry a switching fee.

1. 1Loan health check. Collect the balance, remaining term, rate type, any fixed expiry date, offset and redraw balances and current fees from the latest statement and loan contract.
2. 2Compare the total cost. Set the monthly saving against every switching cost, including a break fee if a fixed rate applies, and work out how many months it takes to recover them.
3. 3Apply and supply documents. The new lender makes inquiries about your finances and verifies them, as responsible lending rules require.
4. 4Valuation and assessment. If the new lender values the property, that valuation sets the loan to value ratio (LVR) and whether LMI applies, and the lender assesses whether the repayments are affordable.
5. 5Discharge authority. The borrowers sign the old lender's discharge form so it can prepare to release its mortgage.
6. 6Settlement. The new loan pays out the old one, the old mortgage is released and the new mortgage is registered.

FundUp's refinancing page puts the typical span at two to four weeks from application to settlement, depending on the current lender's discharge timeframes. The sections below cover what happens at each stage and what can hold it up.

The first step in refinancing a home loan is to write down exactly what the current loan is, because every comparison depends on it. The latest statement and the original loan contract hold most of what is needed:

• The balance owing today and the years left on the loan term
• Whether the rate is variable, fixed or split, and the date any fixed period ends
• Money in an offset account and any extra repayments available to redraw
• Ongoing fees, such as an annual package fee or a monthly account fee
• The discharge fee the current lender charges to close the loan
• Whether LMI was paid when the loan started

The remaining term matters as much as the rate. Moneysmart warns that a new loan can end up with a longer term than the years left on the current mortgage, and that the longer you have a loan, the more you pay in interest. Comparing loans over the same remaining term stops a lower monthly repayment from hiding a higher total cost. The offset and redraw figures come back into play on settlement day.

Moneysmart says to make sure the benefits outweigh the costs before switching; on cost alone, the break-even period shows how many months of repayment savings it takes to cover what the switch costs. Moneysmart's mortgage switching calculator works out whether changing loans saves money and how long it takes to recover the cost of switching. The table lists the costs to total first. Amounts come from each lender's fee schedule and from the state land titles office (Titles Queensland for a Queensland property), so none are quoted here.

Divide the total switching costs by the monthly repayment saving and the result is the number of months to break even. A break-even period longer than the time you expect to keep the loan means the switch costs more than it saves. The National Credit Regulations prohibit early termination fees on residential loan contracts entered into from 1 July 2011, subject to limited exceptions; ASIC's RG 220 lists break fees and discharge fees among the charges the ban does not cover. FundUp says its own refinance comparison includes discharge fees, application costs and LMI.

A refinance is assessed as a new loan, so the new lender asks for evidence of your finances and can decline if the numbers do not work. Under ASIC's responsible lending obligations, a credit licensee must make reasonable inquiries about your financial situation, take reasonable steps to verify it, and must not provide a credit contract that is unsuitable for you. Lenders typically ask for evidence such as:

• Identification for every borrower on the loan
• Income evidence: payslips for PAYG employees, or tax returns and business financials for the self-employed, covered in how lenders assess self-employed income
• Recent statements for the current home loan, offset and savings accounts
• Statements for credit cards, car loans and other debts
• Living expenses

Four things can stop a refinance going ahead. Serviceability: APRA requires banks and other authorised deposit-taking institutions to assess new borrowers at a rate at least 3 percentage points above the loan product rate, a buffer APRA kept in place on 28 May 2026, though it allows case-by-case exceptions where prudent. Valuation: a lower figure raises the LVR. Credit history: a credit report carries repayment history information showing on-time and missed payments, and each application is recorded as a credit enquiry. New debts taken on before settlement also change the serviceability numbers.

The discharge authority and the valuation are two steps that commonly set the settlement date of a refinance. NAB describes the discharge authority as a form given to the previous lender that notifies it the mortgage is going to be discharged and the loan repaid and closed, and notes that each lender has its own discharge process. On NAB's own form the borrowers can name authorised representatives such as a solicitor or broker, and once all borrowers sign, NAB has authority to discharge. NAB asks for at least 10 business days to process a discharge form; other lenders set their own timeframes, so a form lodged late or missing a signature moves the settlement date.

The valuation runs alongside the discharge. If the new lender values the property, that valuation sets the LVR, which Moneysmart defines as the loan amount as a percentage of the property's value. If the valuation comes in lower than expected, the LVR rises, and once the loan exceeds 80% of the value LMI usually applies; lenders mortgage insurance explained covers that cost. Moneysmart suggests that a borrower who switches asks for a refund of some of the LMI paid on the current loan. FundUp says it handles discharge forms, valuations and lender follow-ups on the refinances it arranges.

On settlement day the new home loan pays off the existing one. NAB describes the new lender liaising with the previous lender to pay out and discharge the old loan and registering a new mortgage over the property. The loose ends sit with the borrower, and this checklist covers them:

• Offset balance. Confirm with both lenders what happens to the offset account and when its balance needs to move.
• Redraw. Lenders can stop redraw before settlement; NAB, for example, may cancel redraw on a loan being discharged from 6am on the business day before the scheduled settlement date.
• Direct debits and salary. Repayments set up as direct debits, and any pay credited to an account linked to the old loan, need redirecting to the new accounts.
• Fixed portion. A break fee on a fixed portion is charged when that portion is ended early; have the written figure from the current lender before the discharge is signed.
• First repayment. Check the date and amount of the first repayment on the new loan, and that the old loan shows a nil balance after discharge.

Refinancing direct with a lender and refinancing through a broker follow the same steps; the difference is who compares the loans and who handles the forms. Going direct means comparing lenders yourself, for example with Moneysmart's switching calculator, then managing the new lender's application and the old lender's discharge form. A broker compares loans across a panel and manages the application. From 1 January 2021, brokers must act in the best interests of consumers and prioritise their interests when providing credit assistance, as ASIC's guidance for mortgage brokers explains.

Moneysmart says a broker should present more than one option and explain how each works and what it costs. Lenders generally pay brokers a commission that is a percentage of the loan, typically upfront and ongoing, which brokers must disclose; a broker charging you a fee directly needs a written quote you sign first. FundUp is a Cairns-based mortgage broker serving clients Australia-wide, with everything handled digitally. FundUp says it compares a panel of more than 40 lenders and recommends a switch only if it puts you ahead, and states its service costs you nothing because the lender pays the commission. Ned McLachlan, Director and Broker, handles every application himself. Repayments on a new loan amount can be estimated with the calculators, and FundUp's process is set out on its refinancing page.