Switching home loans

Making the switch

Switching home loans could potentially save you thousands of dollars in interest or let you take advantage of features offered by another loan. Do your sums and work out if the benefits of switching are worth the costs.

Compare lenders

See what loans are available from different credit providers. A comparison website will give you an idea of what different lenders are offering, or you may choose to use a mortgage broker to help you choose a loan.

Ask your lender for a key facts sheet

When you find some loans that offer the features you want, ask the lender for a key fact sheet on each loan to compare features. Credit providers have to give you a key facts sheet on home loans, if you ask for one.

Key facts sheets give you the information you need in a set format, so it is easier for you to shop around and compare loans. They highlight important information such as the total amount to be paid back over the life of the loan.

Here are some example key facts sheets:

Ask your current lender to do better

Tell your current credit provider you are planning to switch to a cheaper loan offered by another lender. They may suggest an alternative loan at a cheaper rate, or offer to reduce the interest rate on your current loan to keep your business. Compare any loan they offer with other loans you are considering.

Keep in mind that a discount below the listed interest rate will often be available, so speak to potential lenders to get the best deal.

See choosing a home loan for more details on what to look out for.


Be wary of companies that offer loans that claim to pay off your mortgage faster. The only way you can do this is by increasing your repayments or finding a loan that has low fees and a low interest rate.

Compare interest rates, fees and features

Once you have a short list of potential loans, draw up a table to compare the interest rates, fees and repayment amounts of each loan. Use our checklist for choosing a home loan to help you.

Work out whether you will save money by switching to another mortgage.

Mortgage switching calculator

Also see interest rates and fees for more information.

Make sure you check the loan features to ensure you are getting the features you want and not paying for the ones you don't need.

Work out the costs of switching

Exit fees, break fees and start-up fees

Lenders are not allowed to charge exit fees on loans taken out after 30 June 2011. If you took out a home loan before 1 July 2011, find out if your lender charges exit fees on your loan.

If you are on a fixed rate loan, you may need to pay a break fee. You should also check the start-up fees on a new loan. Find out more about fees.

Lender's mortgage insurance

Lenders' mortgage insurance (LMI) is a type of insurance that credit providers take out to protect themselves from borrowers not being able to repay the loan. If you paid lender's mortgage insurance on your current loan, find out if you have sufficient equity in your home to avoid paying LMI again.

If your loan is more than 80% of the current value of your home, you may have to pay LMI again with a new lender, especially if you are increasing your loan amount. This can greatly increase the cost of switching loans.

However, if you switch loans within the first year or two you may get a refund of some of the LMI premium you paid on your current loan.

Find out more about lenders' mortgage insurance on our home loan fees page or read the LMI fact sheet on the Insurance Council of Australia's website.

Length of the new loan

Some lenders only allow you to refinance with a loan of 25 or 30 years rather than the number of years you have left to pay off your current loan. This means that if you take on the new loan your repayments will drop, but if you only pay the minimum in repayments it will take you 25 or 30 more years to pay off the loan.

If this is the case, think about increasing your repayments for the new loan, so you can still pay it off in a reasonable amount of time. You don't want to still be paying off your home in your retirement just because you switched your home loan.

Case study: Peter and Amy consider changing loans

Couple Looking At Laptop

Peter and Amy think they are paying too much for their home loan and decide to look around for a better deal. After visiting a comparison site, they pick two loans that charge a lower interest rate than their current loan.

Loan A has an establishment fee of $600 and Loan B has an establishment fee of $300. Peter and Amy pick Loan A as it has the lowest interest rate and they think it will be worth paying the establishment fee in the long run. Overall they will pay less interest on their new loan.

Other ways to reduce your home loan

There are other ways to reduce your home loan debt apart from switching loans:

  • Make additional repayments - this will save you interest and help you pay off your loan quicker. See making repayments.
  • Make more frequent repayments - pay loans back weekly or fortnightly at a slightly higher rate (e.g. 5-10% more) rather than just making the standard monthly payment.
  • Consolidate multiple loans - you will save money by paying only one set of fees and you may be able to get a better interest rate. See consolidating and refinancing debts.

If you're struggling with repayments, see problems paying your mortgage.

Switching home loans can save you money, but always check that the benefits, such as interest rate savings, are worth the fees you'll be charged for leaving one loan and taking up another.

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Last updated: 26 Sep 2018