Refinancing Guide Chapter 4: The 7 steps to refinancing your home loan

Everything you need to do when you're ready to refinance

Look at the cost of your current home loan

This one seems like a no-brainer, but it’s amazing how many people don’t really take the time to think about the cost of their home loan. In fact, a UBank survey in February 2017 found that 85% of homeowners didn’t know their current interest rate. While 44% of them could give a rough estimate of the rate they were paying, 41% didn’t have any idea at all.

In other words, if you haven’t kept track of what you’re paying for your home loan, you’re not alone.

So the first order of business if you’re thinking about refinancing is to look at how much you’re currently paying. Your interest rate should be listed on your home loan statement. If your lender has online banking, you should be able to use it to find out your current rate in your account information.

If you can’t find your statements and you don’t have access to Internet banking, you might also be able to check your rate using your lender’s website. If you know what home loan product you have, you can check your lender’s current rates for the product and it should tell you what you’re paying. Of course, this won’t work in the case of fixed rates. If you have a fixed rate loan, you’ll be paying the rate that was on offer when your home loan settled rather than the rate that’s on offer now.

If all else fails, you can call your lender to find out. But you’ll need to have some account information handy, such as an account number or customer number. If you do end up having to call your lender to find out your current rate, don’t feel badly. Contacting your current lender is a crucial step in the refinancing process, as you’ll soon see.

There’s one last word on checking in on your current home loan. Make sure you find out about any ongoing or annual fees you’re paying as well. These will factor into your calculations when you work out how to get yourself a better deal.

Talk to your current lender about a better deal

One big step many people miss in the refinancing process is talking to their current lender about getting a better rate. But this should always be one of the first steps you take, because your lender is highly motivated to keep you. In fact, they have entire teams devoted solely to keeping you as a customer.

In general, it costs a bank much more to bring in new business than to retain old business. Your current lender doesn’t want you to leave, because after paying your home loan for a few years
you’re a more profitable customer than a brand new home loan customer.

You can try to get a better deal in a couple of different ways. One way is to just ring and ask. Tell them you’re thinking about shopping around for a new home loan provider, and ask what kind of deal they’re willing to offer to make you stay. It’s likely they’ll be willing to negotiate to keep your business.

If you have a flair for the dramatic, another way to get a better deal is to call and tell your current lender that you’re refinancing your home loan with another provider. You’ll either be transferred directly to the retention team, or you’ll get a call back from them within minutes.

While you might not have thoroughly researched all your home loan options at this point in the refinancing process, it is good to have a rough idea of some of the rates on offer. If you can quote your lender a lower rate you’d like to be paying, you have a point at which to start your negotiations.

There are a couple of caveats to this step, however. First, you’ll want to make sure you’re the kind of customer your lender actually wants to keep. In other words, you need to have made all your repayments promptly.

Second, you need to be ready to follow through on your threat to refinance with another lender. If your lender calls your bluff and either won’t budge or won’t offer a rate you’re happy with, you should be prepared to make a switch.

Finally, even if your current lender offers you a better deal, you should still do the kind of thorough research laid out in the steps ahead, to make sure it makes sense to stay with them instead of finding a better deal somewhere else.

Check out how much it will cost to exit your current home loan

As we discussed in a previous chapter, there are some costs associated with leaving your current lender.

Almost every lender will charge you a discharge fee. This usually isn’t more than a couple of hundred dollars, so it shouldn’t seriously eat into your refinancing savings. But you should still check to see exactly how much you’ll be paying.

If you’re in a fixed rate home loan, you’ll need to check the break costs for leaving your loan before the term is over. These can run into the tens of thousands, but could be as low as a few hundred dollars. The best way to find out is to simply call your lender and ask.

You’ll also want to figure out if you’ll be forced to pay lenders mortgage insurance (LMI) again. If the equity you have in your home is less than 20% of its value, you’ll most likely have to pay LMI again. If you do have to pay LMI, Genworth has a handy calculator that can give you an estimate of what you’ll be paying.

Compare home loans

Now it’s time to take some real action. Use finder.com.au and the table below to compare some of the best rates on the market. Right away you’ll probably find a number of lenders with significantly cheaper rates than you’re currently paying.

But it’s important to compare beyond just the headline rates. The rates you see in the table below will give you a really good idea of some of the lenders worth a closer look. Once you take that closer look, pay attention to the interest rate and the following factors:

Fees

This is one of the most important issues. High annual or ongoing fees could eat into the value you get from a new lender. Not all fees are a deal-breaker, of course. For instance, some package loans charge an annual fee, but give steep rate discounts and waive other fees.

To get an idea of whether the fees associated with a new lender are too high to make refinancing a good idea, take a look at the comparison rate. The comparison rate takes into account fees and charges, along with the interest rate.

Now, the comparison rate you see advertised can change based upon the amount you borrow. But if you go to a lender’s website, you can generate a Key Facts Sheet based on your own borrowing circumstances which will give you a personalised comparison rate.

Features

Remember to compare home loans by examining the features they offer, since some of these features can help you shave years off your home loan. Some features you might look for would be:

  • An offset account. As we discussed previously, an offset account can help you pay your home loan off faster by reducing the amount on which interest is calculated. An offset account can save you tens of thousands of dollars in interest and take years off your home loan.
  • A redraw facility. A redraw facility allows you to withdraw any extra repayments you’ve made as you need them. This is handy if you face some unforeseen expenses.
  • A split facility. A split facility lets you divide your home loan between different products offered by the lender. For example, you could have a portion of your home loan on a variable rate and a portion on a fixed rate.

Just remember, some of these features also come with fees. When comparing home loans, it’s important to think about the features you think you’ll use, and what you can do without. A fee is worthwhile for a feature that helps you pay your loan off faster or take more control of your finances, but if you don’t think you’ll use a feature there’s no sense paying for it.

Flexibility

The best mortgages for most borrowers also offer you flexibility and let you manage your home loan in the way that’s best for your specific circumstances. Some of the flexible options you might want include:

  • Extra repayments. Look for loans that give you the option of making additional repayments. This will help you pay off your home loan faster, and allow you to devote any extra cash you have to your mortgage. Most variable rate loans allow unlimited additional repayments, while most fixed rate loans cap extra repayments at a certain amount.
  • Repayment types and frequencies. Many loans allow you to set up your repayments on a schedule that’s most convenient for you. You can choose to repay weekly, fortnightly or monthly. Look for providers that offer this flexibility. Also, some loans will allow you to choose between paying both the principal and interest or, for a set period of time, just the interest. Investors often choose interest-only repayments to maximise their cash flow while minimising their expenditures.
  • Portability. If you end up moving house during the term of your loan, some home loans will allow you to transfer your loan to your new house. This can be a great feature, as it means you won’t have to go through the application process again. There is often a fee involved with moving a home loan from one property to another, but it’s much less expensive and time-consuming than getting a new home loan.

Once you’ve looked into the rates, fees, features and flexibility of different home loan products and narrowed down your search, it’s time to weigh up the cost of switching lenders.

Look at the costs of moving to the new lender

You should have already calculated the cost of exiting your old lender. Now you’ll want to look at the up-front costs of moving to your new lender.

As we discussed before, there are a few common up-front fees you might be asked to pay. You may be charged an application fee, a settlement fee and a valuation fee, to name a few.

When you’re looking into these fees, also pay attention to any promotions lenders are running. Lenders love to get refinancing business from another lender. They’re usually profitable loans at lower LVRs from borrowers with a proven repayment track record. Because they’re highly motivated to get this business, lenders will sometimes run special deals where they waive fees for refinancers, or even offer to pay clients some of costs associated with leaving their current lenders.

Once you’ve worked out the costs of leaving your old lender and the costs of moving to your new lender, you should get a good idea of how much you’ll actually save by switching. You should also be able to identify the lender and home loan product that will deliver the biggest savings.

Apply for your new home loan

Now that you’ve found the home loan that’s going to give you the best deal and the biggest savings, it’s time to apply. Different lenders will have different application processes, with some taking place entirely online and some requiring you to mail or scan and send forms and documents. In general, though, there are few details you’ll need to have ready:

  • Personal information. You’ll need to provide your name, date of birth and contact info. Also, you’ll be asked to produce a valid ID, such as a driver’s licence, Medicare card or passport.
  • Financial information. You must provide details of your employment, income, assets and liabilities. Lenders will want documentation on this, so you’ll need to have payslips and bank statements ready.
  • Loan information. Details of your current home loan are required, so your lender can see your repayment history and outstanding loan amount.
  • Property information. Your new lender will need details about your current property. They’ll want to have a valuation done to assess its current value so they can determine how much to lend you.

Once you’ve applied, approval generally takes anywhere from a day to eight business days. With some online lenders, it can take just minutes or hours.

Exit your old home loan

This is the easy part. Your new lender will communicate with your old lender to discharge you from your old home loan. They’ll exchange all the necessary documentation and take care of things like the title transfer for you.

Once this is done, your new home loan will reach a stage called settlement. This is when the actual funds are disbursed to pay out your old home loan. If everything goes according to plan, you should be able to get from application to settlement within a couple of weeks.

And that’s that. Congratulations! You’ve successfully refinanced your home loan. Now just make sure to do a health-check on your home loan every 18 months or so to make sure you’re still getting a good deal. But for now, pat yourself on the back. You’ve likely saved yourself a massive amount of money.

The whole refinancing process takes a little time and a little research, but it’s pretty straightforward for most people. Unfortunately, this isn’t always the case. For some borrowers, refinancing can be a bit tricky. In our final chapter we’ll discuss what to do if you find yourself in a difficult refinancing situation.

Check out the other parts in this guide

Or you can find a better home loan right now

Rates last updated May 23rd, 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
3.69%
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.
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
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.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
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. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer 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.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.69%
3.71%
$0
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.69%
4.06%
$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.
3.88%
4.89%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited fees.
3.77%
3.81%
$200
$0 p.a.
95%
A simplified mortgage with a low interest rate and a redraw facility.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.68%
3.69%
$0
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
3.79%
3.79%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home 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.
3.54%
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.
3.69%
3.73%
$600
$0 p.a.
95%
Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
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.
3.79%
3.81%
$0
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.73%
3.73%
$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.
3.69%
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.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate loan comes with no application or ongoing fees, and offers a 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.
3.69%
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.
3.89%
4.87%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
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%
4.86%
$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.
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%
Refinancers can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.89%
4.88%
$0
$395 p.a.
95%
Refinance from your existing loan and get a $1,250 rebate. Terms and conditions apply. Plus get discounts on a range of Westpac products.

Compare up to 4 providers

Home Loan Offers

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

Start your home buying journey with 2 years of fixed repayments and a reasonable rate from a big 4 bank. Available with a 10% deposit.

UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupied Variable P&I Rate — borrowing $700,000 or more

Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)

New borrowers or refinancers from another lender get a discounted rate with this package loan.

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