What empty nesters need to know about refinancing

When your kids move out of home, it’s a good time to re-evaluate your finances and plan for your twilight years.

Refinancing for empty nestersAs an empty nester, you face the bittersweet time when your grown kids have moved out and you now need to rethink your lifestyle. At this stage in your life, it’s a good idea to review your home loan and your financial well-being to ensure that your mortgage is meeting your needs and you can set yourself up comfortably for retirement.

Trading in a high-interest home loan for a lower rate can generate substantial monthly savings that can be cashed into a retirement account. Refinancing is not only an opportunity to lower your monthly repayments, it also provides an avenue to build equity or access equity in your home. Switching to a new lender may also enable you to upgrade or reconfigure your family home so it better suits your lifestyle.

However, make sure you speak with a financial adviser before making a move.

What you need to consider

  • Finance options. If you’re preparing for retirement, you may want to opt for a home loan with lower rates and fees or a loan that allows you to access equity. As a result, you may want to opt for a “no frills” home loan or a line of credit or home equity loan. Fixed rate loans may also be ideal because it will be easier for you to plan for your future knowing your repayments will remain unchanged throughout the life of the loan.
  • Length of time until retirement. The number of years you have until you plan to retire will have a big impact on whether or not it makes sense to refinance. For instance, if you have another 10-15 years until retirement, you may want to shorten your term and lower your repayments before you leave the workforce. However, if you’re planning to retire within 5-10 years, keep in mind that a lower interest rate does not always justify the decision to refinance. Refinancing may extend your loan term, which means you’ll be paying interest for a longer period of time.
  • Debt management. You need to understand whether or not you will retire with debt. If you are refinancing to a 30-year mortgage and intend to retire in 15 years, you need to think about how you will service the loan for the 15 years in which you are not receiving an income.

How empty nesters can go about refinancing

  • Assess your needs. As an empty nester, you’ve probably moved beyond the most expensive stage of your life – you’ve paid off your kids’ school fees, you’ve got a steady super balance and you’ve built up considerable equity in your home. You need to carefully consider your lifestyle and budget needs. Can you afford to hold on to your family home? Should you consider downsizing? Or do you want to expand your property portfolio?
  • Get your finances in order. If your kids have vacated the family home, now is an ideal time to speak with a financial planner about how you can build wealth for the future. Refinancing is a viable option for many empty nesters, but you should also think about how you can leverage your super savings as an effective retirement tax strategy.
  • Chat to your lender. Most borrowers don’t realise that they can negotiate their interest rate with their existing lender. Simply make the phone call to your bank, as they may be willing to negotiate a more competitive rate. The home loan market is competitive and saturated, and most banks are willing to negotiate to retain your business. However, if it’s a different loan type or features that you’re after, then it may be time to switch.
  • Calculate refinancing cost. It’s important to carefully estimate the switching cost. You may need to pay a discharge fee, which could range from $150 - $350 as well as government charges to exit your current mortgage. If you have a fixed rate, you’ll need to pay a break cost. With your new loan, you’ll need to pay upfront costs such as application fees or legal fees charged by the new lender. You can use our switching cost calculator to get an estimate of your total refinancing costs. Remember to consult your trusted accountant or financial planner to help you through this stage.
  • Compare home loans. Speak with a mortgage broker to discuss the type of loan that will best match your borrowing needs. Maybe you need to take out a line of equity loan to fund a renovation or travel plans, or perhaps you need a loan with no ongoing account-keeping fees. A mortgage broker has access to a panel of lenders to help you find a good deal and even negotiate the mortgage terms on your behalf.

Refinancing as an empty nester planning

Compare line of credit home loans

Rates last updated November 18th, 2018
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$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.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2000000 from a convenient online lender.
3.57%
3.58%
$0
$0 p.a.
80%
Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.
3.87%
3.91%
$600
$0 p.a.
95%
A home loan with no ongoing fee and a redraw facility that you can borrow up to 95% LVR.
3.54%
3.57%
$0
$0 p.a.
80%
A competitive variable essentials interest rate product aimed at refinancers looking to switch to a lower rate.
3.68%
3.70%
$0
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80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.64%
3.64%
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70%
A low interest rate home loan with no application or ongoing fees.
3.74%
3.74%
$0
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80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.49%
3.53%
$250
$0 p.a.
80%
A very low variable interest rate for borrowers with a 20% deposit. Add a 100% offset account for $10 a month.
3.54%
3.58%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility. $900 cashback offer.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Get double Velocity Frequent Flyer Points with this mortgage to spend on flights and more (for a limited time, subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.89%
3.91%
$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%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.79%
3.80%
$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. Plus $1,500 cashback offer for eligible refinancers.
3.75%
3.80%
$600
$0 p.a.
90%
Competitive variable rate mortgage with a partial offset account. Get this loan with a 10% deposit.
3.75%
4.72%
$0
$299 p.a.
95%
Owner-occupiers can enjoy a discounted fixed rate, a rate lock feature and the ability to make additional repayments.
3.79%
4.87%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited fees.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150000 get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.75%
3.75%
$0
$0 p.a.
70%
A simple mortgage with no application or ongoing fees that has extra repayments plus split and redraw options. Requires a 30% deposit.
3.59%
4.00%
$845
$350 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.87%
3.91%
$0
$10 monthly ($120 p.a.)
90%
Get Velocity Frequent Flyer Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.68%
3.70%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers that comes with a no fee debit card with a $5,000 limit.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.64%
3.59%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
3.74%
4.13%
$0
$349 p.a.
90%
Get a sharp rate plus package discounts and a 100% offset account.
3.69%
4.12%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.67%
3.72%
$600
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
4.17%
4.21%
$600
$0 p.a.
95%
Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
3.84%
3.85%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn double Velocity Frequent Flyer Points on your mortgage for a limited time (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate. Cut down on interest costs with a 100% offset account.
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at $70% or below with this innovative online lender.
3.84%
4.22%
$345
$0 p.a.
80%
Flexible, competitive variable rate that has flexible repayments, split and redraw facilities.
3.59%
3.58%
$0
$0 p.a.
80%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for a small fee.
3.72%
4.10%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan.
3.84%
3.84%
$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. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
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.
3.85%
3.85%
$0
$0 p.a.
80%
Low fee loan with extra repayments. Pay no application and ongoing fees and take advantage of split and redraw options.
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.
3.69%
4.08%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.89%
3.94%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.77%
3.82%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.93%
3.94%
$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.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.69%
4.54%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150000 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.
3.94%
4.95%
$595
$0 p.a.
95%
Borrow up to 95% LVR of the value of the property you're buying and pay no application or ongoing fees.
4.04%
3.93%
$0
$0 p.a.
80%
Fix your rate for 1 year and make interest-only payments.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
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.
3.89%
3.94%
$0
$0 p.a.
80%
Pay no application or ongoing fee and borrow up to 80% LVR.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.

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Refinance or downsize?Refinancing as an empty nesters moving out

Many empty nesters are faced with the decision to either refinance their home loan or downsize if their home no longer meets their needs. When weighing up the financial viability of both options, you need to evaluate the costs of refinancing and compare this to the cost of selling your home and moving into a smaller place.

If you decide to refinance, you’ll need to calculate your switching costs to see if refinancing makes financial sense. This will include any discharge fees you need to pay to your existing lender, any government charges as well as any upfront application fees charged by your new lender.

If downsizing seems like the best situation for you, then you’ll need to forecast the cost of selling your home and then buying another property. When selling the property, you’ll need to set aside funds for an agent’s commission, advertising costs, the lender’s discharge fees and removalist costs. Use our property selling calculator to get an idea of the costs involved.

Speak to local real estate agents to see what similar properties are worth in your area, and consider value-adding activities such as minor upgrades or renovations that may help you achieve a higher sale price.

Next, you’ll need to consider whether your house is sellable and whether or not now is the right time to put it on the market. Factor in the time and money required to sell your home and move into a new property such as stamp duty (if applicable), conveyancing fees, inspections, the lender’s upfront fees and lenders mortgage insurance (LMI).

Becoming an empty nester can bring about mixed emotions, but make sure you think about the quality of retirement you’d like to have and plan accordingly. (Fingers crossed your kids won’t be “boomerangs”!).


Images: ShutterStock

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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