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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 June 22nd, 2018
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% 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
3.69%
3.69%
$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. Get $1,000 cash into a USaver account when you apply for a loan of $200,000 or more (new or refinance). Terms and conditions apply.
3.64%
3.66%
$0
$0 p.a.
80%
Pay no ongoing fees and enjoy a flexible repayment schedule, including the ability to make unlimited additional repayments without penalty.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.49%
4.49%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.
3.52%
3.53%
$0
$0 p.a.
80%
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.89%
4.88%
$0
$395 p.a.
95%
Low deposit package loan with a range of discounts. Earn up to 500,000 Velocity Points to spend on flights, hotels and more.
3.73%
3.76%
$0
$0 p.a.
80%
This basic loan offers discounts for higher borrowing amounts and carries no ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
3.54%
3.58%
$0
$0 p.a.
80%
Eligible borrowers can get $900 cashback on this loan with a 100% offset account and a redraw facility.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.64%
3.69%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 June.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.99%
4.85%
$0
$395 p.a.
95%
Competitive fixed rate package loan. For a limited time you can earn Velocity Points to spend on hotels and flights.
3.69%
3.74%
$600
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.68%
4.00%
$0
$299 p.a.
80%
Get a 100% offset account and rate discounts for higher borrowing amounts.
3.79%
3.79%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.62%
3.62%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Get $1,000 cash into a USaver account when you apply for a loan of $200,000 or more. Terms and conditions apply.
3.64%
3.64%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.64%
4.03%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.77%
3.81%
$200
$0 p.a.
95%
A simplified mortgage with a low interest rate and a redraw facility.
3.79%
3.83%
$600
$0 p.a.
80%
A low interest rate loan with limited fees and a redraw facility. Principal and interest repayments only.
3.68%
3.69%
$0
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
4.19%
3.78%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
3.73%
3.76%
$0
$0 p.a.
80%
This basic loan offers discounts for higher borrowing amounts and carries no ongoing fees.
4.09%
4.12%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.99%
3.74%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.79%
3.79%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.68%
4.00%
$0
$299 p.a.
80%
Get a 100% offset account and rate discounts for higher borrowing amounts.
3.79%
3.84%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.89%
3.92%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
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.
3.83%
4.49%
$0
$299 p.a.
95%
Owner-occupiers can enjoy a discounted fixed rate, a rate lock feature and the ability to make additional repayments.
3.69%
4.47%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
3.78%
3.78%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.85%
4.05%
$0
$350 p.a.
95%
This high LVR fixed rate loan allows you to borrow up to 95% of the value of the property you're buying.
4.09%
4.11%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Points on your mortgage (for a limited time, subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
4.09%
4.12%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.99%
4.03%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and pay no application or ongoing fees.
3.59%
4.42%
$600
$0 p.a.
95%
Get a 1% discount for the first two years of your loan and pay no application or ongoing fees.
3.68%
3.69%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Lock in a fixed interest rate term for repayment certainty.
3.89%
4.97%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
3.89%
4.96%
$0
$395 p.a.
95%
Switch to this loan and can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. 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 Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

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