Remove the guesswork of refinancing and know how much better off you'll be
If you already have a home loan and you've been comparing other mortgage options online, you probably have an idea of the potential savings you could make from refinancing.
However, when you're considering whether or not to refinance your mortgage it's important to understand how much you can save and then weigh it up with how much you will have to pay to switch.
Use the below home loan refinancing calculator to estimate how much you could save and to help you decide whether refinancing your mortgage is worth it.
Use the refinancing calculator and compare loans below
Rates last updated February 20th, 2017.
- NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
Interest rate increases by 0.23%
January 16th, 2017
- CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
Comparative rate increases by 0.03% | Interest rate increases by 0.15%
January 19th, 2017
- IMB Accelerator Home Loan - LVR <=80% $300k+ (Owner Occupier)
Interest rate increased by 0.10%
January 30th, 2017
What does the refinancing calculator do?
The home loan refinancing calculator gives you an indication of the amount of money saved over the life of the loan by switching to a new loan listed in the comparison table.
When you enter your existing loan amount, current interest rate and loan term, you will be given an estimate of what you could save by switching.
For instance, if you had a current home loan of $500,000 at 4.5% interest and a term of 25 years, you could save up to $50,000 by refinancing to one of the home loans listed in the current table.
The table is useful because it can also help you identify products that would not lead to cost savings, which can help you with your comparison. Any products that would not lead to cost savings will be highlighted in red under 'amount saved.'
If you're thinking of refinancing to a fixed-rate loan, remember that the table only considers the term of the fixed rate (e.g. 2 years) and cannot consider the savings that may be achieved once this term expires, or when you take out another loan.
Discharge fees and break costs may be charged when exiting your current loan, so make sure you check this with your existing lender to ensure that the costs will not outweigh the savings.
Lenders will also take into account your other debts, assets, income and savings when they are determining how much risk they are taking on by lending to you, so keep this in mind when comparing your refinance home loan options.
How does refinancing work?
People choose to refinance their mortgage to take advantage of a lender offering a better deal. Switching your mortgage could result in lower fees, a lower interest rate or better features. It's important to stay up to date with loans on the market to see if you could be getting a better deal.
Although refinancing to a new leader can lead to cost savings, there are some costs of switching which you should be aware of. For example, you may need to pay exit fees and in some cases these can cost up to tens of thousands of dollars, especially if you are breaking a fixed interest rate term.
When you settle your new loan you may need to pay application fees, appraisal or valuation fees and some administrative fees (however, the calculator takes these into account).
Refinancing your mortgage is also important in regards to your credit file because any loan applications will appear on it. Remember to do your research and compare your options if you are looking to refinance so you can minimise the possibility of having to make multiple loan applications, which will appear on your credit file.
When you are trying to determine whether refinancing your mortgage will be worth it, you should be aware of the different interest rates currently on offer from different lenders so you know how much you could be saving.
Use the table above to compare home loans that can be used for refinancing purposes. Simply enter your current loan amount, interest rate and loan term, and then click 'calculate.'
The calculator will estimate the amount that you could save by refinancing to each of the loans that appear in the table. You can view the potential cost savings under 'amount saved' to quickly see whether switching to one of the home loans would benefit you financially.
Things to consider before you refinance
If you are looking at refinancing as a 'quick fix' solution, then you may want to consider a different approach. Refinancing will really only help you in the long term because of all of the upfront costs you have to pay when switching and also because it may take time for your savings to be realised. Home loans are a long-term commitment, and any decision regarding your mortgage needs to be made with that in mind.
If you have a variable rate home loan and are feeling overwhelmed with interest rate changes, you may want to speak to your lender and see if you qualify for any interest rate discounts, or see if they will do a better deal for you to keep you from switching.
Reasons for refinancing
Refinancing to consolidate debts
If you are considering to refinance your loan in order to consolidate your debts you should first calculate the combined amount of debts that you want to consolidate. You then need to include this amount in the cost of your new loan. By calculating the combined monthly repayments of all your existing debts and then calculating monthly repayments of your refinanced home loan you will be able to see if consolidating your debts will be worth it in the long run.
Refinancing to pay for renovations or a holiday
You can refinance your mortgage to access the equity in your home if you need money to undertake renovations on your property, or even take a holiday. To determine the amount of equity you have in your home you need to take the value of your property and then minus the difference of what you still owe. This is the dollar amount of the portion of the property that you own.
Keep in mind you will not usually be able to access the full amount of equity you have, but will usually be allowed around 80%. This is to protect the borrower in case you default on the loan. After you calculate how much equity you can access you then need to decide whether to receive those funds as a lump sum or a line of credit that you can access gradually. A line of credit is especially suited to renovations as it can help with budgeting.