Staying with your current lender could be costing you thousands. Find out if you could save in the table below.
Being loyal to your home loan lender could be costing you thousands of dollars over the course of your loan term. The mortgage market today is competitive, with plenty of lenders offering great deals to all types of borrowers. Refinance home loans and you could end up with a cheaper home loan which better suits your needs.
Scroll down to compare some of today's refinancing deals in the table below. You can also read on further to learn how the refinancing process works and some tips for a more successful switch.
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Rates last updated October 21st, 2016.
- Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
Comparative rate increases by 0.08%
October 10th, 2016
- Bank of Sydney Expect More Package Loan - PAYG Variable (Owner Occupier)
Comparative rate increases by 0.10% | Interest rate increases by 0.10%
October 10th, 2016
- ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Maximum LVR now 80%.
October 11th, 2016
Aussie’s Mortgage Brokers can save you time and effort by helping you research, organise and apply for your home loan, at no cost to you. They compare hundreds of home loans to help find the right deal for you. Fill out the form on the left and an Aussie Mortgage Broker will meet you at a time of your choosing to discuss your needs and help you find the right loan.
Refinancing is the act of switching home loans. This can be by moving your loan to a new lender, or just by changing the type of home loan you have with your existing lender.
Usually, refinancing is done to get a lower rate or a loan suitable for pursuits such as renovations.
More often it's done by switching to a new lender that may offer an interest rate or features that better suit your situation.
As we mentioned above, refinancing is usually done to reduce costs or to better suit your life.
In reality there are a range of reasons why you might want to say goodbye to your existing lender and look for a new one.
Let's have a look at the various reasons below:
It's always a good idea to approach your existing lender first to ask for a better interest rate. Make sure you do your research beforehand and show them the existing deals in the market and ask if they can match it. Staying with your existing lender could mean that you save on discharge or exit fees plus application fees of your new loan, not to mention the amount of paperwork you've saved. If your lender is unwilling to help, then it might time to move on.
If you've built a significant amount of equity in your home and you'd like to use as a line of credit, you could opt for an equity line home loan. You can use this equity to purchase other properties or assets, such as funding a renovation for your home or purchasing a new car. One of the advantages to this is that you can purchase an item with the same interest rate as your home loan, rather than committing to an interest rate offered on a personal loan or credit card. However, one of the risks of accessing this equity is that it might take a bit longer to pay off your mortgage. Your interest is calculated on the remaining balance of the account, so the longer you hold your income, the less interest you can pay.
Again, it's a great idea to approach your lender first if you want more features. Features like additional repayments, portability and offset accounts can help you save on interest repayments. If you existing home loan doesn't have these features and you feel as though you have the financial capacity to make additional repayments and leave money in your offset account, then it might be the time to switch. Also,
Also, a redraw facility is usually available if you opt for additional repayments so you can access the extra money in an emergency. For example, for those who have built equity in their home, you may be looking for a line of credit and for investors, you may be looking for interest-only repayments.
Fees should always feature in a home loan comparison. Compare the application or establishment fees, ongoing fees, valuation fees, monthly or annual fees, and any other fees for using features such redraw facilities or 100% offset accounts. Just because a home loan has an annual fee or application fee it doesn’t mean it should be avoided. Take the time to look at it in depth and find out whether the fees are worth it for the benefits.
Different home loans suit different life stages, look below to see what kind of loans or characteristics may suit you.
First home buyers
- Low rate and low fees
- Ability to make extra repayments
- Introductory rate or basic home loans may suit these borrowers
Young professional or family
- Redraw facility
- Standard variable or fixed rate loans may suit these borrowers
Middle aged professional
- Redraw and offset facilities, packages with linked products
- Convenient and flexible product
- Package home loan or line of credit loan may suit these borrowers
Preparing for retirement
- Low rates and fees
- Ability to access home equity
- Line of credit home loan or basic home loan
55 and over/retired
- Redraw facilities and option to access equity
- Line of credit home loans or reverse mortgages may suit these borrowers
Many home loans will offer refinancing cash incentives or sign-up bonuses all year around, with the most offers happening during ‘mortgage season’ which is usually around Spring. These are usually around the $1,000 mark, but can be as high as $2,000. These can be a great way to minimise the costs of refinancing, but be sure that the loan you’re applying for still has a competitive rate, fees and features so that once the cash back is gone you’re not left with an uncompetitive loan.Back to top
Refinancing involves first speaking to your lender to see if they can give you a discount or offer a better loan. Presuming this doesn't solve things, you'll then compare other loans and apply for one you're interested in.
The diagram below explains the process visually.Back to top
- You could potentially get a lower rate
- You could potentially save on fees
- Your loan might suit you better in terms of interest rate type and features
- Your new lender might offer better service
- You'll have to pay a discharge fee to get out of your old loan
- You'll usually have to pay upfront fees for your new loan
- You might have to pay expensive break fees for your old loan when you leave if it's a fixed rate
Refinancing should be done when you can get a home loan which costs less (either in fees and rates) and still suits your needs, or suits them better than your previous loan.
Other reasons for refinancing include:
- To renovate your home
- To consolidate debts
- To buy a new home
You can read in depth about good reasons to consider refinancing in our guide.
Former Aussie Home Loans General Manager of Marketing Stuart Tucker neatly sums up when you should consider refinancing:
- You have a fixed rate home loan with a very high exit cost and the cost of fees could outweigh the benefits of refinancing until the fixed rate period is over
- You think you’ll probably sell your property in the near future and you won't keep the loan long enough to make any decent savings
- Your loan amount is small; in this case the savings you’ll get by refinancing might not be worth the interest you’ll pay
- You've been with a lender for quite some time, enjoy the service you receive and have other products with them (you might be better off asking your lender for a discount)
- Your property value has fallen or your LVR is still over 80%, this could see you pay lender’s mortgage insurance again
- You need to refinance to a longer term, but this could result in more interest paid
Exit costs of old loan
- Discharge fees. $200 - $400. These are usually charged by your old lender to give you back your title deeds.
- Exit fees. $varies. If your loan was entered into before 1 July 2011 you may still have to pay mortgage exit fees, even on a variable rate home loan. These can be quite expensive, but you might be able to get a discount from your lender. If you have a fixed rate home loan, you’ll still have to pay exit fees as your lender could be losing out by letting you leave your loan.
Upfront costs of new loan
- Application/establishment fees. $200 - $600. These fees cover the initial costs of setting up your home loan.
- Valuation fees. $100 - $300. Your new lender will want to have your property valued to decide how much to lend you. This fee covers the cost of an independent valuer.
- Settlement fees. $100 - $300. This fee covers the cost of your lender arranging your funds.
- Legal fees. $75 - $150. These fees cover the cost of your lender's solicitors which arises out of your application.
- Stamp duty. $varies. You may have to pay stamp duty when refinancing, which is charged by the state. We have a stamp duty calculator you can use to get an estimate of how much you might pay.
- Lender’s Mortgage Insurance (LMI). $varies. If you’re borrowing over 80% of the property value you could have to pay LMI premiums. This can cost well into the thousands, and depends on how large your loan is and how much equity you have.
- Ongoing costs. $varies. A home loan might keep charging you fees even once you’ve settled. Things like redraw fees, monthly fees or annual fees should be taken into account.
Are there any tax implications when refinancing?Back to top
If your looking to review your current home loan for a better rate, it could also be a good time to review your current insurance polices to ensure you have an adequate level of cover in place at a competitive price. Many lenders will require that you have at least home insurance to protect the property. Most insurance consultants will recommend you review your life insurance policy annually to ensure it still measures up to your financial obligations. It could be worth making a free enquiry with a consultant to find out what else is available and if your better off refinancing. Protect your loved ones and loved possessions with home insurance.Back to top
Generally you’ll need to provide proof of your salary and other income, government payments, home loan statements and a copy of your council rates notice. Statements for any liabilities and either your drivers licence or passport. Once your information has been reviewed, your lender can normally give you a response fairly quickly. The verification, valuation and assessments, approval and settlement can take up to a month or more to complete depending on your financial situation.Back to top