Refinancing when unemployed

Refinancing your mortgage while unemployed is challenging, but it may be possible if you have an alternative means to repay the loan.

Refinancing when unemployed

Unemployment can be a vicious cycle. You can’t refinance without a job and without a job, you can’t afford your home.

Although many borrowers see refinancing as an attractive opportunity to trim their monthly repayments, qualifying for a new loan is very difficult if you're unemployed and you can’t prove your serviceability potential.

However, there are some specialist lenders that may approve your application if you can demonstrate that you have genuine savings or equity, or if you apply with a guarantor to provide security for the loan.

What you should consider

  • Finance options. If you’re unemployed, you need to realistically consider which finance options will best suit your situation. You may be interested in a low doc basic home loan with competitive interest and no ongoing fees, or you may want to find a loan that allows you to borrow with a guarantor as security for the loan.
  • Length of unemployment. While unemployment is not ideal, you need to think about the length of time that you are likely to be unemployed, and plan your finances accordingly. The amount of time that you're unemployed may be out of your control if, for example, you have been made redundant. If this is the case, you should ensure that the lender knows that you're actively seeking work. You can do this by providing them with evidence of your application with a recruitment agency, for example. However, if the reason is within your control and you intend to return to the workforce- for instance, if you’ve left your job to pursue your studies for 6 months but your employer has granted permission for you to return- you should also notify the lender of this situation.
  • Serviceability potential. In order to refinance your mortgage, you’ll need to build a strong case for your ability to repay the mortgage. If you don’t have a source of stable income, you’ll need to show the lender that you have adequate savings, equity, a monetary gift, shares, government benefits (if applicable) or another income source that will service the loan.

How to improve your chance of being approved

  • Mortgage broker. If you intend to switch your home loan to a new lender you should speak with a mortgage broker to help you understand your borrowing capacity. Mortgage brokers can draw upon their network of lenders and put your application in front of a lender that’s more likely to review your application.
  • Consider niche lenders. If you don’t use a mortgage broker and you decide to approach a new lender yourself, consider specialist lenders or building societies as these lending institutions may have more lenient criteria compared to more conservative lenders.
  • Clear existing debt. Before approaching a new lender, request a copy of your credit file and be proactive about clearing your name of debt. For instance, this may involve contacting your phone supplier and requesting a payment plan to ensure that you pay your bills in full and on time.
  • Evidence of genuine savings. A lender will be more inclined to approve your application if you can prove that you have the financial means to repay the loan. Generally, the lender will review your income sources to determine whether or not you are capable of servicing the loan. They may request to see evidence of regular deposits into a savings account to show that you have financial discipline, so make sure that you have this information handy.
  • Consider a guarantor or cosigner. If you can refinance to a joint application, consider borrowing with your partner or a cosigner. This combines two different income sources which raises your capacity to service the loan. It also considers the credit history of both borrowers, so make sure you both have good credit history.
  • Large deposit. If you have the savings, try to borrow with an loan-to-value ratio (LVR) that is less than 80% to avoid paying lender’s mortgage insurance (LMI). This means you’ll need to come up with a 20% deposit.
  • Government assistance. If you’ve been made redundant, you can lodge a claim with Centrelink to receive the Newstart Allowance and depending on your situation, you can receive around $600 per fortnight. If you’re a single parent, you may be eligible for the Family Tax Benefit Part A and B, or if you’re at retirement age, you can apply for the Australian Aged Pension. Find out which government benefits are accepted by home loan lenders.
  • Job seek. As mentioned above, you should take every step to show the lender that you are actively seeking employment. If you’re receiving a government benefit, you may be required to show that you are looking for casual or part-time work.

Speak with a mortgage broker about your personal situation

Data indicated here is updated regularly
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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
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
2.59%
2.59%
$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.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.65%
2.66%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.29%
3.99%
$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. $2,000 cashback offer for eligible refinancers.
loans.com.au Smart Home Loan - (Owner Occupier, P&I)
2.63%
2.65%
$0
$0 p.a.
80%
Get a low variable interest rate and pay 0 application or ongoing fees with this convenient online lender.
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, P&I)
2.65%
2.67%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
$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. Eligible refinancers can receive a cashback of $2,000 or more.
IMB Budget Home Loan - Special LVR <=90% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.78%
2.84%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
ME Flexible Home Loan Fixed with Members Package - 2 Year Fixed Rate LVR <= 80% (Owner Occupier, P&I)
2.49%
3.41%
$0
$395 p.a.
80%
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
State Custodians Low Rate Home Loan with Offset - LVR up to 60% (Owner Occupier, P&I)
2.49%
2.51%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Owner occupier, P&I)
2.19%
2.46%
$250
$0 p.a.
90%
Low fee fixed mortgage with optional 100% offset account.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
3.11%
3.12%
$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.
Virgin Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.29%
2.91%
$300
$10 monthly ($120 p.a.)
80%
Buy your home and lock in a low rate for the first two years. Get a $2,500 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 28 August and settle by 30 October 2020.
Gateway Bank Low Rate Essentials Variable Rate Home Loan - Special offer LVR up to 80% and over $500k (Owner Occupier, P&I)
2.76%
2.79%
$0
$0 p.a.
80%
A competitive, flexible variable rate mortgage for home buyers borrowing above $500,000. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.29%
2.90%
$395
$0 p.a.
80%
A competitive fixed interest rate loan with no ongoing fees. Requires a 20% deposit.
Greater Bank Great Rate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
2.19%
3.54%
$0
$0 p.a.
90%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
2.29%
3.12%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Well Home Loans Balanced Variable - LVR 90% (Owner occupier, P&I)
2.67%
2.70%
$250
$0 p.a.
90%
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month.
State Custodians Low Rate Home Loan with Offset - LVR up to 60% (Investor, P&I)
2.74%
2.76%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
Well Home Loans Balanced Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.19%
2.44%
$250
$0 p.a.
90%
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee.
ME Flexible Home Loan With Member Package - LVR <=80% $400k up to $699,999 (Owner Occupier, P&I)
2.84%
3.29%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
IMB Fixed Rate Home Loan - 2 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.49%
3.15%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online. Available with a 5% deposit.
ME Flexible Home Loan Fixed - 3 Year Fixed Rate LVR <= 80% (Owner Occupier, P&I)
2.74%
3.93%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
Virgin Reward Me Variable Home Loan - LVR <= 60% ($750k+ Owner Occupier, P&I)
2.60%
2.77%
$300
$10 monthly ($120 p.a.)
60%
A competitive variable rate loan for home buyers with large deposits. Get a $2,500 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 28 August and settle by 30 October 2020.
Well Home Loans Balanced Variable - LVR 80% (Owner occupier, P&I)
2.47%
2.50%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, IO)
2.44%
2.94%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
3.17%
3.19%
$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.
loans.com.au Essentials - Variable (Owner Occupier, P&I)
2.79%
2.81%
$0
$0 p.a.
90%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $1000000 from a convenient online lender.
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Investor, P&I)
2.90%
2.92%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account. This loan is not available for construction.
IMB Fixed Rate Home Loan - 3 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.49%
3.10%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 5% deposit.
State Custodians Low Rate LOC - LVR up to 60% (Owner Occupier, IO)
2.74%
2.76%
$0
$0 p.a.
60%
Withdraw up to 70% of your home equity with this competitive line of credit loan. This loan is not available for construction.
Gateway Bank Low Rate Essentials Variable Rate Home Loan - Special offer LVR up to 80% and over $500k (Investor, P&I)
3.04%
3.07%
$0
$0 p.a.
80%
Investors with 20% deposits can get this flexible variable mortgage with low fees and a reasonable rate.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)
2.59%
3.59%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
loans.com.au Smart Home Loan - (Investor, P&I)
2.94%
2.96%
$0
$0 p.a.
80%
A competitive variable investor rate for borrowers with 20% deposits. Low fees, redraw facilities and repayment flexibility.
ME Flexible Home Loan Fixed - 2 Year Fixed Rate LVR <= 80% (Owner Occupier, P&I)
2.64%
4.03%
$0
$0 p.a.
80%
Get a low fixed rate and pay no application or ongoing fees.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
2.44%
3.57%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
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How to go about refinancing if you're unemployed

  • Assess your needs. If you’re unemployed, you need to carefully consider your lifestyle and financial needs. Does refinancing make financial sense? What are your refinancing objectives? Can you commit to your mortgage repayments? How will you manage your debt?
  • Speak 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. You may also want to approach your lender to see whether they will allow you to apply for a repayment holiday to ease financial pressure. However, if you’re after a different loan type or varied features, then it may be time to switch.
  • Calculate refinancing cost. The most important stage of refinancing is to carefully estimate the switching cost to ensure that you will reap significant cost-savings. You may need to pay a discharge fee, which could range from $150 to $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. Compare loans above or speak with a mortgage broker to consider the type of loan that will best match your borrowing needs. Maybe you need a standard variable rate home loan with minimal ongoing fees or maybe you're looking for a home loan with no application fee. A mortgage broker has a network of lenders on their panel so they can help find a good deal and even negotiate the mortgage terms on your behalf.

Before signing on the dotted line, make sure you carefully consider the cost and risks of refinancing your mortgage while you're unemployed. It’s essential that you speak with mortgage brokers, an accountant and financial planner to discuss your financial options in detail.

Images: Shutterstock

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