The Refinancing Checklist: 10 Things to Do Before You Switch Lenders
- Refinancing typically costs $1,500-$3,500 in upfront fees — these costs must be recovered through interest savings within 2-3 years for refinancing to make financial sense
- Get a written break cost quote from your current lender before doing anything else — fixed rate break costs can be $0 or $20,000+ depending on rate movements
- Your property valuation determines your LVR and therefore your rate tier — a higher valuation than expected can unlock lower rates; a lower valuation can trigger LMI
- Lenders assess refinance applications differently — the lender that approved your original loan may not offer the best terms for your refinance
- A mortgage broker can identify which lenders' current policies and rates best match your current financial profile, which may be different from your profile at origination
- Allow 2-4 weeks from application to settlement for a standard refinance — complex situations or slow lenders can take 6-8 weeks
Why a Checklist Matters Before You Refinance
Refinancing looks simple from the outside — you switch lenders, get a lower rate, save money. In practice, borrowers who refinance without preparation regularly encounter unexpected costs, valuation surprises, and approval delays that either eliminate the financial benefit or derail the process entirely.
Working through this checklist before you approach a lender or broker means fewer surprises, faster processing, and a higher probability of achieving the outcome you're after.
The 10-Point Refinancing Checklist
1. Get a Written Break Cost Quote from Your Current Lender
If you are on a fixed rate loan, this is the first and most important step. Break costs are calculated based on the movement in wholesale interest rates between when you fixed and today. They can range from zero (if rates have risen since you fixed) to tens of thousands of dollars (if rates have fallen significantly since you fixed).
Do not assume break costs will be manageable — get the actual figure in writing from your lender before doing anything else. Your bank or lender is required to provide this on request. Without this number, you cannot calculate whether refinancing makes financial sense.
If you are on a variable rate loan, skip this step — variable rate loans do not attract break costs.
2. Check Your Current Rate Against the Market
Log into your current lender's account or call them to confirm your exact current interest rate. Then compare it to current market rates for your loan type (owner-occupier or investment, principal and interest or interest-only, your approximate LVR).
A rate difference of 0.4-0.5% or more generally justifies the cost of refinancing. Smaller differences may not recover refinancing costs within a reasonable timeframe. Use this comparison as your initial filter before investing significant time in the process.
Lender rates vary significantly — some lenders charge existing customers considerably more than the rates advertised to new customers. If your current rate is well above market, your lender may match a competitive rate to retain your business before you formally refinance.
3. Calculate Your Current LVR
Your loan-to-value ratio determines which rate tier you qualify for and whether LMI applies. LVR = current loan balance divided by current property value.
To calculate your current LVR accurately, you need two figures: your current loan balance (from your most recent statement) and a realistic estimate of your property's current market value (not what you paid for it — what it is worth today).
Check recent comparable sales in your suburb using CoreLogic, Domain, or similar. Do not rely on the purchase price, especially if you purchased several years ago and the market has moved.
Note: your lender will conduct their own valuation as part of the refinance process. This figure may differ from your estimate — sometimes significantly.
4. Identify Your Refinancing Goal
Before approaching anyone, be clear on what you are trying to achieve. The answer affects which lenders and products are appropriate.
Common refinancing goals:
- Lower interest rate to reduce monthly repayments or total interest paid
- Access equity for investment deposit, renovations, or other purposes
- Switch from interest-only to principal and interest (or vice versa)
- Add or remove an offset account
- Change from fixed to variable (or vice versa)
- Consolidate debts
- Improve loan features (redraw, split facility, portable loan)
5. Gather Your Financial Documents
Most refinance applications require similar documentation to your original loan application. Having these ready before you apply speeds up the process significantly.
Typical documents required:
- Last 2 payslips (PAYG employees)
- Last 2 years of tax returns and financial statements (self-employed)
- Last 3-6 months of bank statements
- Current home loan statement showing balance and rate
- Rates notice or council valuation for the property
- Identification documents
Self-employed borrowers should ensure their most recent tax return is lodged before applying — lenders cannot assess income from an unlodged return.
6. Check Your Credit File
Your credit file includes your repayment history, credit enquiries, and any defaults or court judgments. Lenders review this during every application. A surprise negative mark — a missed payment you forgot about, a default from years ago — can complicate or delay approval.
You can access your credit report for free from Equifax, illion, or Experian. Check it before applying. If there are errors, dispute them before submitting a refinance application.
Multiple credit enquiries in a short period can temporarily reduce your credit score. This is one reason working through a single broker is preferable to approaching multiple lenders independently.
7. List All Your Debts and Liabilities
Lenders assess your full financial position, not just your home loan. Prepare a complete list of all current liabilities including:
- All loan balances and monthly repayments
- Credit card limits (lenders assess 3% of the limit as a monthly repayment regardless of balance)
- Car loans and personal loans
- HECS/HELP debt
- Any buy-now-pay-later balances
If you have credit cards you do not use, consider closing or reducing limits before applying. Every $10,000 in unused credit card limit reduces your assessed monthly surplus by approximately $300, reducing borrowing capacity by approximately $50,000-$60,000 at current rates.
8. Estimate Total Refinancing Costs
Before committing, estimate the full cost of refinancing. Typical costs include:
Costs on your outgoing loan:
- Discharge fee: $150-$350
- Break costs (fixed rate only): $0 to $20,000+ — get a written quote
- Early exit fee (some older loans): $200-$600
Costs on your incoming loan:
- Application fee: $200-$600 (some lenders waive this)
- Valuation fee: $300-$600
- Legal/settlement fee: $300-$800
- Government registration fees: $100-$300
Total typical cost: $1,500-$3,500 (variable rate to variable rate, no break costs)
Some lenders offer cashback refinance deals ($2,000-$4,000) that can offset these costs — but always compare the overall rate and features, not just the cashback offer.
9. Calculate Your Break-Even Point
Divide your total estimated refinancing costs by the annual interest saving from the new rate.
Example: Total refinancing costs $2,500. Annual interest saving at new rate: $2,000. Break-even period: 15 months.
If you plan to keep the property and the loan longer than the break-even period, refinancing is financially sensible.
10. Compare Lenders — Not Just Rates
Interest rate is the most visible variable but not the only important one. Before committing to a new lender, also compare:
- Offset account availability and cost
- Redraw facility terms and any fees
- Extra repayment caps (fixed rate loans)
- Annual package fees
- Split loan availability
- Portability (can you take the loan with you if you buy a different property?)
- Lender's known processing speed and service quality
Lender policies on all of these vary significantly, and the cheapest rate does not always produce the best overall outcome. A mortgage broker can compare the total package across 40+ lenders. Contact Luke Drake to compare your options before committing.
Frequently Asked Questions
How long does refinancing take from start to finish?
A standard refinance from application to settlement typically takes 2-4 weeks. Key stages are pre-approval and assessment (5-10 business days), formal approval and loan offer (2-5 business days), and settlement coordination (5-7 business days). Complex situations can take 4-8 weeks.
Can I refinance if I am self-employed?
Yes. Self-employed refinancing requires 2 years of personal tax returns and business financial statements. A broker who regularly places self-employed borrowers knows which lenders' policies best suit your income profile.
Will refinancing affect my credit score?
A formal refinance application creates a credit enquiry which has a minor, temporary impact on your score. Working through a single broker who submits to one lender at a time is more credit-file-friendly.
What if my property valuation comes in lower than expected?
A lower-than-expected valuation increases your LVR, which can push you into a higher rate tier or — if it exceeds 80% — trigger LMI on the new loan. A broker can sometimes request a different valuer or approach lenders with more favourable desktop valuation policies for your suburb.
Disclaimer
This checklist provides general information about the refinancing process in Australia. It does not constitute personal financial advice. Refinancing costs, lender policies, and market rates change regularly. Always verify current details with your lender or a qualified mortgage broker before making any decisions. Contact Luke Drake at Frontier Finance Co for a personalised refinancing assessment.