Get the Finder app 🥳

Track your credit score

Free

Coronavirus and home loan refinancing

The COVID-19 pandemic and looming recession is actually a wise time to look at refinancing your mortgage. Here's what you need to know.

Updated

Fact checked

We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder .

Anything you can do to save money right now will protect you from the worst economic effects of coronavirus. If you have a mortgage, refinancing (which means switching) to a new, better mortgage could save you a lot of money and help you get your biggest debt under control.

Here are three reasons to think about refinancing now and some tips on how to do it in the middle of a pandemic.

Rates have never been lower

It's simple: a lower interest rate means lower repayments. The Reserve Bank has lowered the official cash rate five times since June 2019, including two cuts in March 2020. This has driven interest rates on variable rate loans down to historically low levels.

Fixed rate loans are also incredibly low now, with new offers from some lenders going as low as 2.19%.

In short, there has never been a better time to refinance your mortgage.

Coronavirus and its economic effects are a big driver behind these lower rates, but even if the pandemic ended tomorrow refinancing still makes sense.

Here's an example. Let's say you haven't looked at your mortgage for a while and your interest rate is 3.49%. This was the lowest you could find in March 2019. Fast forward to March 2020 and you can find variable rates as low as 2.49%. That's a huge difference.

Scenario: how to refinance and save $3,228

  • Loan amount: $500,000
  • Loan term: 30 years
  • Interest rate: 3.49%
  • Monthly repayment = $2,242
  • Loan amount: $500,000
  • Loan term: 30 years
  • Interest rate: 2.49%
  • Monthly repayment = $1,973

Your monthly saving by refinancing in this scenario is $269, or $3,228 a year. That's money you can save or even use as extra repayments to pay off your loan faster (or put it into an offset account for the same effect).

An offset account will save you money and act as a buffer

Economic uncertainty and growing unemployment are major effects of the coronavirus pandemic, but your home loan could be one way you protect yourself financially.

Does your current home loan have an offset account? If so, you're already in a good position. If not, consider switching to a loan that does have one.

An offset account allows you to save money like a normal savings account, but every dollar saved in the account temporarily offsets your loan principal. If your outstanding loan balance is $200,000 but you put $10,000 in your offset account, your lender will charge interest based on the offset amount, or $190,000.

So you pay less interest over time. But if you need money suddenly, because your income has fallen or you've lost your job in a recession, you can use the offset account savings as needed to cover mortgage repayments or other expenses.

If you are fortunate enough to have savings, putting it into an offset account lets you save, pay less interest and still access cash when you need it.

It could be time to rethink your strategy

Coronavirus is wreaking economic destruction. Now more than ever, it's vital that you look at your mortgage, your home and your property strategy. This is true for everyone but especially for investors.

Many borrowers opt for interest-only loans. This lowers their loan costs in the short term and allows them to write off interest costs on tax while collecting rent and anticipating capital growth as the property market booms.

But with the coronavirus shutting many things down, it looks like property prices will drop for at least a while. If you're in this situation then refinancing to a principal and interest loan will help you pay off your actual debt and own more of your property. This acts as a buffer if prices drop heavily or you're unable to find a tenant.

This is just one example, and even in this situation you might judge that the interest-only option is still better for you. But now is the perfect time to take stock, read up on the market and make sure your mortgage matches your property strategy.

Struggling to pay your mortgage during COVID-19? Help is available

How to compare, apply and switch

Refinancing requires a whole new home loan application. There's paperwork involved and lots of documents to sign. It's at least a few hours' work but the savings are well worth it. Here are the basic steps to refinance:

  • Check your current rate and start comparing home loan options to find better products.
  • Check your loan-to-value ratio. You can't really refinance unless you own at least 20% of your property's current value. If your deposit was under 20% and you haven't paid off much of the loan then switching means paying lenders mortgage insurance (even if you paid it already). Refinancing during the coronavirus pandemic could make this trickier. You might have less than a 20% deposit if your property is worth less now.
  • Find a mortgage that suits you and submit an enquiry. From here your lender will get in touch and help you through the application process. Alternatively, chat to a mortgage broker and they will help you find and apply for a loan.
  • Gather your documents and submit your application. You'll need documents that prove your identity, plus information about your bank accounts, assets and any other debts you have. The lender will look closely at your spending too, so minimise big, luxury purchases in the few months before you apply.
  • If your application is approved then your new lender will take over your loan and take care of the rest. You will need to complete a discharge form to leave your old mortgage.

Online home loan applications during coronavirus self-quarantine

Getting a mortgage requires a lot of face-to-face contact with brokers, lending specialists at bank branches and a conveyancer. But personal contact is very hard to do when self-isolation is in effect.

Going with an online lender makes a lot of sense during coronavirus. With these lenders you can input almost all your details online and get support by phone and email. They often have the cheapest rates on the market too.

However, most lenders and brokers are abiding by physical distancing guidelines and have strong phone and online support as well. But keep in mind that even with the most tech-savvy digital lenders, you'll still need to physically print and sign some forms and have them witnessed. You may need someone to come to your house and verify your identity. These processes are all harder to complete thanks to coronavirus.

Compare competitive rates and refinance today

Data indicated here is updated regularly
$
% p.a.
Offset account
Split account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.54%
2.56%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.29%
2.31%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
loading

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details and get a free consultation with an expert broker from Aussie.

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)

More guides on Finder

Home Loan Offers

Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site