How to compare refinance home loan offers beyond the advertised rate

The advertised rate is the number lenders lead with, and it is the number most refinance comparisons start and finish with. It is also only one line in the cost of moving. Two offers with the same headline rate can end up costing very different amounts once you add the fees charged to set the new loan up, the fees charged to close the old one, the features you give up, and any costs attached to exiting your current loan early.

This guide gives you a checklist for lining those items up side by side. It does not rank lenders or tell you which product to pick — the right answer depends on your loan size, how long you expect to keep the property, and what you actually use.

Why the headline rate is only the start

A rate is a price per year on the money you owe. Fees are prices charged regardless of the balance, or charged once. That difference matters most when the gap between two rates is small: a slightly lower rate on a smaller balance, held for a short time, can be outweighed by a single upfront fee that never comes back.

Moneysmart puts the size of the prize in context: it notes there can be an interest rate difference of more than 2% in variable home loan rates on the market, and that refinancing to take advantage of a lower interest rate might save you money. "Might" is doing real work in that sentence. Whether it does depends on the arithmetic below.

What actually moves the rate you are quoted

Moneysmart notes that the Reserve Bank of Australia's Monetary Policy Board meets eight times a year to decide whether to increase, decrease or maintain the cash rate — and that the cash rate is not the only thing affecting home loan interest rates.

Practical read: do not build a comparison around where you think rates are heading. Lenders price in funding costs, competition and their own margins alongside the cash rate, and a variable rate can move in either direction after you switch. Compare the offers in front of you on their current terms, and treat any forecast as a question, not a fact.

Line up the fees on both sides of the move

Ask each lender for a written list of every fee applying to your loan, then split it into two columns.

Costs of starting the new loan

• Application or establishment fee
• Valuation fee (sometimes waived, sometimes passed on)
• Settlement or registration fees, including any government charges
• Ongoing fees — monthly, quarterly or annual account-keeping fees. These are the ones that quietly erode a rate advantage every year you hold the loan.

Costs of leaving the current loan

• Discharge fee from your existing lender
• Any deferred establishment or documentation fee buried in your original contract
• Costs tied to closing or moving linked accounts or packages

An ongoing annual fee is worth more attention than a one-off fee, because it repeats. A one-off fee hurts most if you expect to refinance again or sell within a couple of years.

Features you may be giving up

Features are priced into the rate. A cheaper loan with fewer features is not automatically cheaper for you — it depends on whether you use them.

Check each offer for:

• Offset account — a transaction account whose balance reduces the interest charged. Confirm whether it is full or partial offset, and whether there is a fee attached.
• Redraw — access to extra repayments you have already made. Confirm any minimum, fee or limit on withdrawals.
• Extra repayments — confirm there is no cap or penalty.
• Fixed, variable or split — different tax treatment of risk. A fixed rate removes rate movement for a period but usually restricts extra repayments and can carry costs if you exit early.
• Package arrangements — sometimes a package fee buys you a rate discount plus other products. Price the package against a plain loan plus whatever you would actually pay for separately.
• Repayment frequency and loan term — confirm the term being offered. Resetting to a fresh 30-year term lowers repayments and raises total interest, which can make a refinance look better than it is.

Break costs and exit friction

If you are on a fixed rate, or you fixed within the last few years, ask your current lender for a written break cost estimate before you commit to anything. Break costs are not a flat fee; they are calculated from how rates have moved since you fixed, so the figure can change between the estimate and the day you discharge. Also ask:

• Is there a fee to fix, unfix or switch between products?
• How long does discharge take, and will you need to cover interest on both loans during the overlap?
• If you have lenders mortgage insurance from the original purchase, does any part of it carry over or get refunded on a like-for-like refinance?

Cashback: treat it as a rebate, not a saving

Refinance cashback is a one-off payment, usually conditional. Before counting it, confirm in writing:

• The minimum loan size and minimum loan-to-value ratio required
• Whether you must hold the loan for a set period, and whether it is clawed back if you refinance or sell earlier
• The settlement date deadline
• Whether accepting it changes the rate or package you are offered

Then net it off: cashback minus new-lender fees minus exit fees minus any lost features you value. If the number is small relative to your balance, the rate and the ongoing fees matter more over time.

Comparison checklist

What to compare	Why it matters	Where to confirm
Headline rate and type (variable/fixed/split)	Sets the ongoing price of the debt	Lender's product page and credit guide
Comparison rate	Bundles rate and certain fees into one figure — confirm what it includes and over what term	Lender's product page
Upfront fees (application, valuation, settlement)	One-off cost that must be recovered by the savings	Written fee list from the lender
Ongoing fees	Repeat every year you hold the loan	Written fee list
Exit costs on your current loan (discharge, break costs)	Can exceed the first year's savings	Your current lender, in writing
Offset, redraw, extra repayments	Determine whether you can actually use the loan the way you want	Product terms
Loan term offered	A longer term lowers repayments but raises total interest	Loan offer document
Cashback conditions	One-off, conditional, sometimes clawed back	Lender's offer terms in writing
Time to settle	Affects how long you carry costs	Lender, at application

Questions to put to each lender

1. What is the full list of fees on this loan, upfront and ongoing, in writing?
2. What is the comparison rate, and what exactly does it include?
3. Is the rate conditional on a minimum loan size, LVR, or a package fee?
4. Can I make extra repayments and redraw them, and are there limits or fees?
5. Is the offset full or partial, and does it carry a fee?
6. What is the loan term, and can I keep my remaining term rather than resetting?
7. What are the cashback eligibility conditions and the clawback period?
8. How long from application to settlement?

Where to check your work

Compare slowly, on paper, using your own balance and your own expected timeframe. And be aware of who is doing the comparing: Moneysmart notes that comparison websites can be a useful way to compare products, but they are businesses and may make money through promoted links. That applies to any site that ranks or promotes products — including the order in which results appear.

Australian Cash is an independent information website. It is not a lender, a broker, a government body or a regulator, and it does not rank or promote home loan providers.

Next steps

1. Pull your current loan's rate, remaining term, balance and any fixed-rate end date from your latest statement.
2. Ask your current lender for a written discharge and break cost estimate.
3. Collect two or three offers with full fee lists and cashback conditions in writing.
4. Net the numbers off with the checklist above, using your own timeframe.
5. If the result is close, ask your current lender to match — a retention offer avoids the switching costs entirely.

You can read more about how home loans work in our home loans guide, or use our matching tool to see options based on your own situation.

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General information only. This article is general information about comparing home loan offers in Australia. It is not personalised legal, tax, credit or financial advice, and it does not account for your objectives, financial situation or needs. Rates, fees, features and government charges change, and lender policies differ. Confirm every figure with the lender and the official product documents before you act, and consider speaking to a licensed mortgage broker, financial adviser or conveyancer about your circumstances. Nothing here promises approval, a lower rate or a particular saving.