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 home loans 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 February 22nd, 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

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.

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