Refinancing: How often should you consider switching your home loan?

Yellow and red housesThe market's competitive and rates are low. If you haven’t been paying attention to your home loan, it’s time to give it a check-up.

As the home loan market becomes more and more competitive, it’s hard to miss the constant calls to refinance. And if you do have a home loan, it’s probably wise advice.

Recent research at finder found that switching to a home loan below the average market-wide interest rate could save you up to $69,283.57 over a 30 year loan.

But refinancing isn’t always the best option. If you’ve been in your current home loan only a short time, the costs of refinancing could well outweigh the benefits.

So how often should you refinance your home loan? The answer all depends on the market.

1. Do a health check

It may be frustrating to hear, but there’s no hard and fast rule regarding how often you should refinance. However, as a general rule of thumb, it’s good to do regular home loan health checks.

There are a few times when it makes sense to have a look at your home loan, including:

  • When the RBA moves rates
  • During the spring selling season
  • When regulators change rules regarding lending
  • At least once every 18 months

Even outside events like these you should check your home loan rate against other rates in the market at least every year to year-and-a-half. You might be surprised by how much rates have moved since you first took out your home loan.

2. Check the cost of switching

If you’ve performed a health check on your home loan and determined that there are better rates available, you’ll want to weigh the cost of switching to see if you’ll end up saving money.

Refinancing a home loan can come with a variety of costs. You’ll likely have to pay a discharge fee to close out your old home loan account. You may also have to pay application and settlement fees for your new home loan.

If you had a small deposit when you initially took out your home loan, it’s likely you also paid for lenders mortgage insurance, or LMI. This insurance premium is charged when you have a deposit of less than 20%. If you haven’t been paying your home loan long, it’s possible you haven’t built up 20% of equity in your home. If this is the case, you could have to pay LMI a second time if you refinance, and this could cost you thousands.

Moreover, if you’re in a fixed-rate home loan, you’ll likely have to pay a break cost to exit the home loan before the end of the fixed period. Depending on how long you have left in the fixed period and how much rates have moved since you first took out your home loan, this break cost could be thousands of dollars.

If the costs of switching are too burdensome, they could well outweigh the benefits and you could be better off staying with your current home loan. You can check the potential cost or savings you could see from refinancing with this calculator.

3. Look at the features

Another factor to consider when deciding whether to refinance is the features your home loan has versus the features you’d like.

One useful feature is an offset account. An offset account is a transaction account linked to your home loan that reduces the amount of interest you pay. It does this by offsetting the amount of money on which interest is charged by the amount of funds in the offset account. For instance, if you have a $750,000 home loan with $50,000 in a linked offset account, you’ll only be charged interest on $700,000.

Another helpful feature is a redraw facility. This account allows you to withdraw any extra funds you’ve paid on your home loan. If you’ve paid a month or two ahead on your home loan and need to access the funds for another purpose, a redraw facility will allow you to get access to that money.

If your current home loan doesn’t have these features, you might want to consider refinancing to a loan that does. However, be aware that features like these often come with fees or slightly higher rates than loans that lack these features. Make sure to weigh whether you’re likely to use these features before paying for them.

4. Think about fixing

If you’re looking into refinancing, you might want to consider fixing your home loan rate. The benefit of a fixed rate is the certainty it provides. A fixed rate means your home loan interest rate won’t change for a predetermined period of time.

The benefit of this, of course, is that you’ll be insulated from any rate rises. The drawback is that you won’t benefit from any rate decreases during the fixed period, and you’ll be locked into your home loan for the duration of the fixed period and could be charged substantial break fees if you choose to exit it. Another drawback is that fixed-rate products often don’t offer the same features as variable-rate home loans.

However, if you can find a fixed rate that’s lower than your current rate, it could make sense to lock in your rate. A fixed rate allows you to budget with certainty, knowing what your repayments will be each month. If you’re comfortably making your repayments at the moment, refinancing to a lower fixed rate means you can be certain you’ll have no problem meeting your repayments for the duration of the fixed rate.

5. Don’t fall prey to inertia

It’s easy to stay in your current home loan rather than put in the work to refinance to a better deal. But putting in a bit of work could save you tens or even hundreds of thousands of dollars over the life of your loan. With this in mind, it’s important to remain vigilant and regularly check to make sure you’re getting the best deal you can.

Compare refinance home loans today

Rates last updated February 21st, 2018
$
% 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
3.52%
3.54%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.52%
3.53%
$0
$0 p.a.
80%
A competitive variable rate product with no application or valuation fees offered by a 100% online lender.
3.59%
3.60%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.54%
3.58%
$0
$0 p.a.
80%
A variable rate home loan with competitive rate, redraw facility and offset account.
3.69%
3.69%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.49%
4.49%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application fee or ongoing fees with this loan.
3.88%
4.89%
$0
$395 p.a.
95%
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.64%
3.67%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.77%
3.81%
$200
$0 p.a.
95%
A basic home loan with a low interest rate and a redraw facility available.
3.65%
3.66%
$0
$0 p.a.
90%
A competitive variable rate home loan with no application fee.
3.74%
3.74%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans
require no LMI and no deposit. NSW, Qld and ACT only.
3.60%
3.62%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.62%
3.62%
$0
$0 p.a.
80%
A discounted, competitive variable rate loan with limited fees.
3.73%
3.73%
$0
$0 p.a.
80%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.74%
3.75%
$0
$0 p.a.
80%
A special variable rate home loan with no application or ongoing fees.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.64%
4.03%
$0
$395 p.a.
80%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.64%
3.64%
$0
$0 p.a.
70%
A low-rate basic home loan requiring a 30% deposit.
3.94%
3.71%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.78%
3.78%
$0
$0 p.a.
80%
A basic low-rate home loan that still offers some useful features.
3.89%
3.91%
$0
$0 p.a.
80%
Package your owner-occupied loan with your investment loan and enjoy low rates for both.
3.69%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.99%
4.41%
$0
$395 p.a.
90%
A discounted home loan variable rate that comes with a competitive package, an eligible credit card and an offset transaction account.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
4.19%
3.78%
$0
$0 p.a.
80%
Tic:Toc's fixed rate owner occupier loan has a competitive rate, limited fees and a fast, easy online application process.
4.09%
4.12%
$0
$0 p.a.
95%
This loan has a high max insured LVR, making it an option for low deposit borrowers.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
4.09%
4.11%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.97%
3.97%
$0
$0 p.a.
90%
A competitive variable rate home loan with no ongoing fees.
3.99%
3.99%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
4.19%
4.19%
$0
$0 p.a.
90%
100% offset account, unrestricted additional repayments and no monthly account keeping fees
3.89%
4.87%
$0
$0 p.a.
90%
Enjoy a low interest rate and borrow up to 90% (with LMI) of your property's value.
3.99%
4.77%
$0
$0 p.a.
80%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.94%
3.97%
$0
$0 p.a.
80%
Access the equity in your home with a competitive interest-only rate and no application fee.
3.74%
3.74%
$0
$0 p.a.
95%
A low rate home loan with no application or ongoing fees. Free home & contents insurance for 1 year. T&Cs apply. Note that to be eligible for this loan you must be QLD resident.
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.84%
4.83%
$0
$0 p.a.
80%
Get a competitive 2-year fixed rate with no application or ongoing fees.
$0
$0 p.a.
A basic low-rate home loan that still offers some useful features.
3.68%
3.69%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.69%
3.71%
$0
$0 p.a.
90%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.69%
3.69%
$0
$398 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
3.99%
4.03%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.59%
4.42%
$600
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$0
$0 p.a.
90%
Get a low variable rate along with some important basic features.
3.79%
3.79%
$0
$0 p.a.
80%
Minimum loan amount for this basic home loan is $750000.
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Lock in a fixed interest rate term for repayment certainty.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.88%
4.88%
$0
$395 p.a.
95%
Refinance from your existing loan and get a $1,250 rebate. Lock in a discounted fixed rate with a low service fee.

Compare up to 4 providers

iConnect Logo

Enter your details below to receive an obligation-free quote from an iConnect home loans expert today

iConnect Financial mortgage brokers work with a range of well known lenders to find you the right home loan.

  • Completely free, expert home loan advice.
  • Offers a suite of digital tools to make you a smarter borrower.
  • Calculate your borrowing power with a free personalised home loan report.

iConnect Lender Logos

Aggregator of the Year 2016

Australian Mortgage Awards

Was this content helpful to you? No  Yes

Related Posts

Home Loan Offers

Important Information*
loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.52%p.a.
comp rate of 3.54%p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

A competitive variable rate product with no application or valuation fees offered by a 100% online lender.

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special

A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.

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, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question
Go to site