What empty nesters need to know about refinancing

Rates and Fees verified correct on December 10th, 2016

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 December 10th, 2016
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
loans.com.au Essentials - Variable Refinancers Only (Owner Occupier, P&I)
A low-interest rate loan suited for refinancing with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 20%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 80% Go to site More info
CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Borrow up to 90% LVR and enjoy an introductory rate for the first 2 years.
3.69% 3.87% $600 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.84% 4.66% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A discounted rate with 100% offset account. NSW, QLD and ACT residents only.
3.89% 4.27% $0 $375 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
Buy a new home even if you haven't yet sold your existing one with the bankmecu Bridging Loan
3.69% 4.24% $0 $350 p.a. 95% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.64% 4.39% $445 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <70%
An investment home loan with competitive rate and 100% offset account.
3.79% 3.79% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.74% 4.40% $0 $375 p.a. 85% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
3.99% 4.81% $0 $0 p.a. 95% Go to site More info
AMP Essential Home Loan  -  Owner Occupier
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.98% 4.00% $350 $0 p.a. 90% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.74% 4.09% $0 $350 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
Switzer Fixed Rate Home Loans - 2 Years Fixed Rate
A competitive 2 year fixed rate with your very own lending service manager.
3.97% 3.99% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.69% 4.56% $600 $0 p.a. 95% Go to site More info
loans.com.au Fixed - 2 Year Fixed (Owner Occupier)
Another low interest rate offer from loans.com.au. No application fee to pay.
3.89% 3.72% $0 $0 p.a. 90% Go to site More info
3.89% 3.89% $0 $0 p.a. 80% Go to site More info
Switzer Investment Loan
An investment loan with no application or ongoing fees, and your very own lending service manager.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
100% offset account, unrestricted additional repayments and no monthly account keeping fees
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier)
No application or ongoing fees and a competitive 2 year fixed rate.
3.84% 4.75% $0 $0 p.a. 95% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Suncorp Home Package Plus Fixed - 3 Year Fixed Rate (Special Offer $150k+ LVR <=90% Owner Occupier)
Lock in a special offer rate for 3 years for loans over $150k with LVR below 90%.
3.64% 4.26% $0 $375 p.a. 90% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
3.99% 4.97% $0 $395 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info

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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