Refinance without the headache: what you actually save when you switch

Rates are rising, but your repayments don’t have to. Refinancing could quietly put thousands back in your pocket, without the paperwork nightmare you’re probably imagining.

By Nicole Pedersen-McKinnon

The recent first rate rise in more than two years may have you thinking one thing: eeek!

But far more constructive is to take action… because you could sidestep it entirely.

All home loans are far from created equal, with many charging over the odds on both interest rates and fees.

And as Aussies seek to contain the fresh rate pain, they are flocking to refinance – the latest ABS Lending Indicators show more than 57,000 non-first home buyer loans representing $45.5 billion worth of mortgages changed hands in the December 2025 quarter, an increase of 3.6% since the previous quarter.

So why is it that people are moving mortgages? And is it as onerous as it used to be?

The mortgage savings you can secure from switching

Mortgages are priced in a range – the average interest rate will sit roughly in the middle of rates as expensive and as cheap as 75 basis points either way. Indeed, that price range could be even greater!

So, what could a refinance to a better deal save you, in actual dollar terms?

We will assume that you are an owner occupier with a mortgage interest rate of 6.5% and are able to slice 75 basis points off it… don’t miss, that’s the equivalent of giving yourself three rate cuts.

Let’s also assume you have a mortgage of $700,000 (which is close to the current national average mortgage), over 25 years.

At a 6.5% interest rate, your monthly repayments are $4,726.

But if you refinanced down at 5.75%, your repayments would fall by a full $323 a month – to $4404. Over a year that will put $3876 back in your pocket.

Indeed, you are talking about significant savings even from one 25 basis point fall: almost $110 a month on a $700,000 mortgage.

So, how do you go about switching? The good news, when there are such huge savings on offer, is that digitisation and automation mean switching home loans is not as hard as it used to be… 

How to prepare to refinance your home loan

There is a tiny bit of preparation involved for a refinance but very little of the historic rigmarole after that. And remember, the financial rewards could be huge.

The first two steps are to give yourself the best chance of being approved for the loan – they are:

Step 1: Check your credit score; and

Step 2: Curb your spending

Step 1: Check your credit score

You are entitled to four free credit reports and scores from the credit bureau a year and more if you find errors. And that’s the whole point: finding and correcting any errors and just generally making sure your credit score is attractive to a lender… before it’s too late. 

You can get your free reports here: Equifax and Experian.

When you get your credit report, give it a proper once-over. Make sure every loan and debt listed is actually yours and double-check the basics like your name and date of birth are correct.

If anything doesn’t look right or feels a bit out of date, contact the credit reporting agency and ask them to fix it. It’s a free service and it’s one of those small admin jobs that can potentially make a big difference to how smoothly your application for a new home loan goes.

Step 2: Curb your spending

A lender will apply what is unofficially known as the ‘Netflix test’ to your spending in the three months prior to going for a loan. Lenders will scrutinise up to 15 different living expense categories when assessing your loan, and it goes well beyond the basics.

Of course they look at things like groceries, clothing and personal care, but they’re also paying close attention to modern spending habits such as Netflix, Uber and eating out. If this is low, the potential loan amount for which you can be approved will be higher.

As such, it may be worth cancelling some subscriptions and pulling back on discretionary spending, like entertainment and meal delivery, for a few months prior to applying for your new loan.

This might help: 101 clever ways to save money and live a richer life

Note that, if you are self-employed, you will probably also need your tax returns up to date as most lenders will want to look at your income over two years.

Then, when your finances are prepped and ready to apply…

How to apply for a new home loan or mortgage refinance

Applying for a new home loan will be a very simple matter of filling out an online application. Or, if you’d rather, you can book a chat with a home loan specialist who can support you with filling out your application.

Making this incredibly easy today is that you will be asked, as part of the process, to give permission for digital access to your existing loan, deposit and credit card accounts.

From this a lender will be able to instantly ascertain your financial position and, vitally, your capacity to make loan repayments.

This is all part of the ‘serviceability test’ that determines how much you will be allowed to borrow.

Indeed, the only documentation you may need to find and furnish yourself is probably tax returns, pay slips and your proof of identity.

Once done, approval is also usually lightning fast these days.

The actual switching part is simpler than it’s ever been, too. The only other main step is to fill out what will be called something like a ‘mortgage discharge form’ or some such on your existing lender’s website.

This lets your current lender know your intended refinancing institution and leaving date.

Then the rest is up to those two institutions to work out.

So, when you apply, do you need to make any special mortgage requests?

What else you need to know about refinancing

There can be large advantages in looking at how a new mortgage – particularly if you are in your 50s or older – can fit into your retirement plans.

This is a finely balanced thing as often one of the primary goals for pre-retirees is to retire with a fully-paid-off roof over your head… but refinancing your existing loan can give you options and flexibility.

For instance, some lenders will be able to provide – possibly valuable – advice about how your mortgage fits into your bigger financial picture. They can advise you on different loan options to suit your needs. For example, AMP Bank's 10-year interest-only option could free up cash if, say, you want to drop back to part-time hours at work before you fully retire.

There’s also the new breed of loans that come with multiple interest-saving offset accounts. This loan structure allows you to offset against your mortgage any money and savings you have to your name, without getting it mixed up. You can ‘bucket’ your money without giving up any access to cash, in what can be a highly interest-effective and transparent way of managing your finances.

Again, a specialist lender might be able to help with that as well. 

Far from refinancing being too complex or not worth the hassle, it has never been more straightforward or potentially beneficial.

And with rates up, the possible savings could make it well worthwhile.

Credit provider and product issuer AMP Bank Limited AFSL/Australian Credit Licence 234517. This article contains general information only. It is not financial advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial circumstances, objectives and needs.

^{Feature image: iStock/Nes}

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