Refinancing
Should I refinance or ask my bank for a lower rate?
Why negotiating with your existing lender is a sensible first step – but not the whole comparison.
Short answer
Ask your existing lender for a lower rate first because it may improve your loan without switching costs or a new application. Then compare that offer with suitable alternatives. Staying is only the better option if the overall result is competitive.
A simple order of operations
Find a genuinely comparable market rate, then ask your lender's retention team to review your pricing. If they improve it, compare the revised loan against other options using the same balance, remaining term and repayment type.
- Interest rate and comparison rate.
- Upfront and annual fees.
- Offset, redraw and repayment flexibility.
- Approval policy and the cost of changing lenders.
When refinancing may be stronger
Switching may be worthwhile when your lender will not price competitively, you need different features, or another lender assesses your situation more appropriately. Avoid extending the term merely to make repayments look lower unless that is a deliberate strategy.
Prepare before calling your bank
Find one or two genuinely comparable alternatives for your loan amount, LVR, occupancy type and repayment structure. A heavily advertised rate may apply only to a different borrower profile. Know your current rate, annual fee, balance and estimated property value. Then ask the lender to review both the rate and product. Sometimes an older package or loan type remains expensive even after a small pricing discount, so a product change within the same bank may also be worth discussing.
Compare the retention offer properly
A retention discount is useful because it can avoid a new valuation, application and settlement. However, compare the revised rate with the new lender's rate after fees and features. Check whether the discount is permanent, discretionary or tied to a package. Ask when it will take effect and request confirmation in writing. If the existing lender comes close to the best alternative, the saving from switching may not recover the costs within a reasonable period.
Reasons to stay or move
Staying can make sense when the pricing is competitive, the loan works well and the switching benefit is small. Moving can make sense when you need an offset, additional loan splits, a different cash-out policy or an assessment approach better suited to self-employed income. The best decision is not automatically the lowest rate. It is the option that meets the objective at a reasonable total cost, with an approval pathway that fits your circumstances.
Questions to ask before you proceed
- What is the net saving after every discharge, application, valuation and ongoing fee?
- How long is the break-even period if the remaining loan term stays the same?
- Which valuation, income or policy issue could still change the approval or pricing?
Key takeaway
Negotiate first, but decide using a complete market comparison – not loyalty or rate alone.
Official guidance: Moneysmart: Switching home loans
This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.
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