Refinance
Refinancing in 2026: When the Numbers Justify the Move
Refinancing decisions are rarely as straightforward as a rate-card comparison suggests. The headline rate is one input among several. Switching costs, break fees on existing fixed terms, cashback offers that disappear after twelve months, and the lender's underlying servicing posture all shape the actual outcome. The calculation that matters is not whether the new rate is lower; it is whether the structure on offer compounds in the borrower's favour over the remaining term.
The real cost of switching
Refinancing in Australia typically carries direct switching costs of between $500 and $2,000, before any cashback offset. The components are reasonably consistent across the major lenders.
- Discharge fee at the outgoing lender: typically $350 to $500 per loan. A borrower with two splits will pay it twice.
- Application or establishment fee at the incoming lender: often waived on refinance promotions, but check the comparison rate, not the headline rate.
- Property valuation fee at the incoming lender: commonly $200 to $400, though many lenders absorb this on refinance to compete.
- Legal and registration fees to discharge the existing mortgage and register the new one: typically $150 to $400 total, varying by state title office.
- Lenders Mortgage Insurance if the LVR pushes above 80% at the new lender. LMI is rarely transferable; refinancing into a higher-LVR position can mean a fresh premium.
The cashback question
Refinance cashback offers in 2026 commonly sit in the $2,000 to $4,000 range, sometimes conditional on minimum loan size, maximum LVR and settlement within a defined window. Some lenders cap the offer to higher loan amounts (often $250,000 or above) and shorter settlement windows (often 90 to 120 days).
Cashback is a one-off. The rate the borrower lands on persists for the remainder of the term. A four thousand dollar cashback against a rate 0.20% higher than an alternative lender on a $700,000 loan can be paid back in interest within the first twelve to fifteen months, subject to lender criteria.
The right framing is to compare two real numbers: the cashback received in year one, against the additional interest paid over years one through five. The cashback should be the tiebreaker, not the headline.
Cashback dollars come once. The wrong rate, the wrong structure or the wrong lender compounds for the next twenty-five years.
When the numbers justify the move
A refinance generally justifies itself when the rate differential between the current and new loan is large enough that the interest saved over the next two to three years materially exceeds the switching costs and any LMI exposure.
Common situations where the numbers tend to justify a move:
- Rate differential of 0.30% or more at the same loan structure, with adequate equity to avoid LMI.
- Loan structure no longer fits: variable-rate when fixed certainty is needed, or fixed-rate inertia in a falling-rate environment.
- Investment versus owner-occupier mispricing: a property that has changed use without the loan being restructured, leaving the borrower on the wrong rate-tier.
- LVR has dropped below a meaningful threshold (80%, 75%, 70%, 60%) since the original loan, opening sharper pricing tiers at competing lenders.
- Service issue or product limitation at the current lender: missing offset functionality on an investment loan, restrictive redraw, or repeated administration failures.
Fixed-rate break costs
Breaking a fixed-rate loan early can attract a break cost that compensates the lender for the difference between the contracted fixed rate and the market rate at the time of break. Break costs are notoriously hard to estimate without a current quote from the lender.
The break cost can be modest (or even zero) when market rates have risen since the fix was set. It can be substantial when market rates have fallen materially since the fix was set, because the lender is forgoing higher contracted interest income.
Maxfin's process is to obtain a written break cost quote from the existing lender before recommending a refinance during a fixed term. The break cost is then weighed against the rate saving over the remaining fixed period plus the variable period that follows.
How Maxfin runs the refinance numbers
The firm assesses each refinance against three real numbers: the switching cost (discharge plus establishment plus valuation, less any cashback), the interest differential over a defined horizon (typically three or five years), and the structural fit (offset, splits, repayment type, fixed versus variable mix).
Where the rate differential alone doesn't justify the move, structural factors sometimes do. A loan that is technically priced fairly but structurally inflexible can cost more in lost optionality than a 0.10% rate gap costs in interest.
The recommendation Maxfin gives is occasionally to stay. A retention call to the existing lender, armed with a competitor offer, can sometimes produce a price match without the switching friction. The conversation worth having is the one that clarifies whether the move adds value, not the one that assumes it must.
General information only. Not credit advice and not tax advice. Lending outcomes depend on individual circumstances and are subject to lender credit criteria, terms and conditions. Where tax considerations are described, they are general in nature; advice on a specific tax position should be obtained from a registered tax agent or accountant. Maxfin holds Australian Credit Licence 384406 and is not a registered tax agent.