Refinancing when unemployed

Rates and fees last updated on

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 home loan lenders, 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

Rates last updated October 23rd, 2017
$
Loan purpose
Offset 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 Max LVR Monthly Payment Short Description
3.64%
3.66%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.65%
3.66%
$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.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.49%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
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.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
3.74%
3.74%
$0
$0 p.a.
80%
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.69%
3.72%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.73%
3.73%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.86%
3.87%
$0
$0 p.a.
80%
Pay no ongoing fees on a competitive variable rate home loan.
3.99%
4.02%
$600
$0 p.a.
90%
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.84%
3.84%
$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.
3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.64%
3.64%
$0
$0 p.a.
70%
A basic low-rate home loan that still offers some useful features.
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%
4.10%
$500
$0 p.a.
95%
Get a discounted fixed interest rate for the first 12 months while you settle into your new loan.
3.74%
3.75%
$0
$0 p.a.
80%
A special variable rate home loan with no application or ongoing fees.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
3.97%
3.99%
$0
$0 p.a.
90%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.96%
3.98%
$0
$0 p.a.
90%
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.97%
3.97%
$0
$0 p.a.
80%
A competitive variable rate home loan with no ongoing fees.
3.84%
4.83%
$0
$0 p.a.
95%
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.72%
4.19%
$0
$0 p.a.
80%
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.64%
4.03%
$0
$395 p.a.
95%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
4.09%
4.12%
$0
$0 p.a.
80%
Access the equity in your home with a competitive interest-only rate and no application fee.
3.99%
4.02%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.69%
4.45%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.83%
3.83%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.89%
3.91%
$0
$0 p.a.
80%
Package your owner-occupied loan with your investment loan and enjoy low rates for both.
3.79%
3.92%
$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).
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
4.19%
4.19%
$0
$0 p.a.
90%
100% offset account, unrestricted additional repayments and no monthly account keeping fees
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.99%
4.77%
$0
$0 p.a.
95%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.94%
4.88%
$0
$0 p.a.
95%
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
4.33%
4.33%
$363
$0 p.a.
70%
A variable home loan with $0 annual or monthly fees.
3.80%
3.81%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.03%
4.07%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.88%
4.47%
$0
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$600
$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 $750001.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Lock in a fixed interest rate term for repayment certainty.
3.69%
4.03%
$0
$299 p.a.
80%
Enjoy a low variable rate with no application fee.
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%
Lock in a discounted fixed rate with a low service fee.

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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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