Should I refinance my home loan? Everything you need to know | Finder

Should I refinance my home loan now?

With interest rates this low, you could refinance your home loan to save interest and pay less each month on your mortgage. Some fees may apply, so let’s see if you stand to make big savings.

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Why refinance now?

  • Interest rates have never been lower, meaning your current loan could be more expensive than other options.
  • You can lock in a cheap fixed-rate mortgage and get repayment security.
  • There's even a chance to score some cashback when you refinance.

Sounds like a winner, right? For many borrowers, refinancing is a sure-fire strategy to start saving money and paying less for your mortgage. But you need to look at your financial situation and loan before you dive in, to make sure you don't pay more in fees than you stand to save.

Here's how to work out if you should refinance your home loan. But first, consider the reasons why you want to refinance in the first place.

Top reasons to refinance

  1. To finance a property renovation
  2. To get a cheaper interest rate
  3. To get a new loan that saves you money with features like an offset account
  4. To consolidate personal debts, credit cards and car loans into one home loan
  5. To access equity to buy another property, such as an investment property
  6. To access some equity for another reason, such as a holiday

With a clear goal in mind, you can get started on the process of getting a better deal and saving money on your mortgage.

Step 1: Start with your home loan interest rate

How much are you currently paying for your home loan? If your interest rate is above 3%, you're probably paying too much – and switching to a cheaper home loan has the potential to save you a lot of money.

Here's a quick example:

  • Your current loan amount: $500,000
  • Current interest rate: 3.25%
  • Current monthly repayment: $2,176
  • New interest rate: 2.59%
  • New monthly repayment: $1,999

In this example, refinancing to a cheaper home loan rate saves you $177 per month.

That's $2,124 per year back in your pocket, rather than the banks'.

Find out how much your current interest rate is and use it as a point of reference.

Compare rates and learn how to refinance

Step 2: Check if you have a fixed rate loan

Let's say your mortgage is locked into an older fixed rate and now it's looking very high compared to better options on the market. You may be able to refinance to a new, lower rate – but first, you need to check what the cost of breaking your fixed rate loan will be.

To do this, contact your bank. As them for a break fee figure, if you leave your loan today. They'll quote you a figure that is valid for that day only, as the amount changes day by day, based on how much it costs the bank to "lose" your business for the remainder of the fixed period.

Generally, the factors that impact your fixed loan break fee include:

  • The time period left on your loan, for example 12 months remaining out of 3 years
  • The interest rate – the bigger the difference between your rate and the current rate it offers new customers, the bigger the fee to break the loan contract
  • Your loan amount – again, the greater the loan amount, the bigger the fee is likely to be

The break fee can be high and if that's the case then it might outweigh the benefits of refinancing to a cheaper loan. Keep in mind that a cashback home loan offer could help to offset at least part of the break fee, so don't make any hard and fast decisions until you know exactly what numbers you're working with.

If it turns out that the break fee is too high and now is not the right time to refinance then make a note in your calendar for a month before the loan expires, so you can compare for a better home loan deal then.

If you don't have a fixed rate, you have the flexibility to move to a new loan without financial penalty. You may want to consider a fixed rate product: rates are very, very low right now (in many cases, even lower than variable rates) so the reduction in your monthly mortgage repayment could be substantial.

Learn how fixed rate breaking costs are calculated

Step 3: Contact your current lender to negotiate first

If you've checked your rate, made sure the break fees aren't too high and you're ready to refinance, there's one step to take before you shop for a better deal. And that is: contact your current bank.

Before you refinance to a new lender, see if you can negotiate with your current lender to refinance your mortgage to a lower rate. If you want to get your hands on some more money, you may even be able to access more equity with a home loan top-up. This allows you to borrow a little more from your equity with your current lender and make your home loan slightly bigger.

If it's just a better rate you want (and you're not seeking to borrow more money), ask to speak to their retention team. Tell them:

  • You're a customer of XX years
  • You want to know if they are able to negotiate on their advertised interest rates
  • If they can't offer a better deal, you'll be shopping around for a new loan

They have teams in place to handle these exact conversations, so don't be intimidated or hesitant to ask. Their entire job is to stop you from leaving, and they often have the discretion to offer you a discount to entice you to stay.

A tip to make your argument for a discount even stronger? See what rate they charge new customers and compare it to what you're paying. Research from the ACCC at the end of 2020 found there can be a difference of up to 0.58% between the rates banks and lenders charge new and existing customers, with cheaper rates offered to newbies to snag their business.

In some cases, they may be able to reduce your variable interest rate over the phone. Other times, they'll request a day or two to come back to you.

Or, there are times when your bank simply won't negotiate a better deal with you – if, for instance, you have a patchy repayment history, or if your home loan balance is quite high in comparison to your property value. This is because they know, to a degree, that they have you captive: customers with less than 20% equity have to pay lenders mortgage insurance again to switch lenders. Often, this is prohibitively expensive.

Once you have an outcome from this conversation, positive or negative, proceed to step 4.

Step 4: Check out the savings you could make by refinancing

Now, it's time to make a choice: stay with your current lender or refinance to a brand new bank?

To be armed with all the information you need to make the best possible decision, it's time to compare current home loan offers for refinancing. Is there a loan available that's even cheaper or more suitable than your current loan?

You can work this out by plugging your current loan details (amount and interest rate) into the calculator at the top of this page. In the table below, you'll see how much you could save by switching to any of the listed products.

For instance, we ran a hypothetical example of a current loan of $680,000, at 2.79%, for 30 years. The savings (over the life of the loan) in the table of home loan options ranged from $8,000 to $130,000!

To help make your decision, you also need to ask your current lender for a quote on how much it will cost to actually switch. Some of the fees they may charge can include things like:

  • Discharge fees with your current lender
  • Early exit fees with your current lender, including the personalised break fee for fixed rate loans
  • Application fees with the new lender, which can range from absolutely nothing to up to $700
  • Settlement fees with the new lender
  • Valuation fees with the new lender, generally $200-$300 (sometimes the lender pays these fees for you)
  • Government mortgage discharge fees, usually between $175 and $325
  • Lenders mortgage insurance premium, if your equity is less than 20%

Use our switching cost calculator to estimate your refinancing costs, but confirm directly with your lender. All up, these fees can add up to around $1,000; it sounds like a lot, but this can pale in comparison to the amount you'll save by switching to a new lower-rate loan (and a cashback offer can also help offset some of these fees).

Learn more about the refinancing process and how to switch loans

Step 5: Pull the trigger on your home loan decision

Whether you decide to stay with your current lender or move to a new bank, it's time to make your decision. If you decide to stay put, make a note in your calendar to check it again in 12 months.

Otherwise, contact your new lender and get the ball rolling. The process of refinancing generally takes a few weeks, though it can be longer during busy periods, and if you apply for a cashback deal, you'll receive those funds a couple of weeks after your new loan settles.

You can compare current competitive home loans for refinancing in the table below and simply click through to the loan you're interested in.

But first: When is the wrong time to refinance?

Be aware that if your equity or loan-to-value ratio (LVR) is above 80%, you'll have to pay lenders mortgage insurance if you switch lenders, which can make refinancing very expensive.

Dominique Berel GrantDominique Bergel Grant, founder of Leapfrog Finance, says there are other factors that may impact your ability to refinance.

"If you have a loss of income or you're faced with unexpected expenses, these factors may inhibit your borrowing capacity and your serviceability potential. As a result, you may not feel confident refinancing your mortgage during such a time of uncertainty," Bergel Grant says.

"Also, if you anticipate a significant lifestyle change, such as if you're planning a renovation or thinking of starting a family, this can impact your ability to get a loan."

In this instance, you might want to refinance as soon as possible, to lock in your new, cheaper loan before your income situation changes.

The same is true if you're planning to change your job in the near future. Most lenders prefer borrowers to have been in the same job for the past 12 months, as it indicates a reliable and steady income source, so get the ball rolling on your refinance before any career changes (especially if you move into an entirely new field).

Finally, if your credit record has worsened since getting your original home loan, new lenders may charge you more interest or you may have trouble gaining loan approval.


Switch to a more competitive rate today

Data updated regularly
$
% p.a.
years
Name Product Interest Rate (p.a.) Comp. Rate^ Application Fee Ongoing Fees Maximum Insured LVR Amount Saved
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$64,892.81
This very low fixed rate is only available until 29 April 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit.
Suncorp Home Package Plus Fixed
1.89%
2.85%
$0
$0 p.a.
80%
$61,167.02
Lock in a low fixed rate loan for two years and get the annual package fee waived in the first year. Available for borrowers with 20% deposits.
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$61,044.54
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 p.a.
95%
$50,287.27
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
St.George Fixed Rate Advantage Package
1.84%
3.38%
$0
$395 p.a.
80%
$61,977.38
Up to $4,000 refinance cashback
Borrowers with 20% deposits or equity can get this competitive fixed rate loan. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Athena Variable Home  Loan
2.19%
2.19%
$0
$0 p.a.
60%
$53,040.06
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
AMP Bank Professional Package Fixed Loan
1.99%
3.1%
$0
$0 p.a.
80%
$58,479.66
Get a low fixed rate package with no application or settlement fee. Available with a 20% deposit. Other fees and charges apply.
loans.com.au Smart Booster Discount Variable Home Loan
1.99%
2.47%
$0
$0 p.a.
80%
$57,788.68
Home buyers can get a very low discounted variable rate for the first year. This loan has a revert rate of 2.48%. Requires a 20% deposit. Add an offset account for an additional 0.10% on your interest rate.
Westpac Fixed Option Home Loan Premier Advantage Package
1.89%
3.46%
$0
$395 p.a.
95%
$60,772.02
Up to $3,000 refinance cashback.
Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
Macquarie Bank Basic Fixed Home Loan
2.09%
2.43%
$0
$0 p.a.
70%
$55,770.62
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit. Refinancers can switch with a convenient digital application.
St.George Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$44,577.54
Up to $4,000 refinance cashback
Get this low-rate variable loan with a 20% deposit and pay $0 application fee. Borrow from $150k (or $250k to be eligible for the cashback offer) (terms, conditions & exclusions apply).
Well Home Loans Balanced Fixed Home Loan
1.89%
2.18%
$250
$0 p.a.
90%
$60,334.6
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
UBank UHomeLoan Variable Rate
2.34%
2.34%
$0
$0 p.a.
80%
$48,903.84
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
HSBC Home Value Loan
2.44%
2.45%
$0
$0 p.a.
80%
$46,119.67
$3,288 refinance cashback offer
Get a low interest variable rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. If you're refinancing $250,000 or above you can get a $3,288 cashback. Terms and conditions apply.
UBank UHomeLoan Fixed
1.99%
2.33%
$0
$0 p.a.
80%
$58,479.66
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
homeloans.com.au Low Rate Home Loan with Offset
2.14%
2.16%
$0
$0 p.a.
60%
$54,408.06
A competitive rate with no application or ongoing fees. This loan is not available for construction.
Macquarie Bank Basic Home Loan
2.49%
2.49%
$0
$0 p.a.
60%
$44,719.6
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit. Refinancers can switch with a convenient digital application.
Suncorp Home Package Plus Fixed
2.28%
3.15%
$0
$375 p.a.
80%
$50,189.12
Lock in a low fixed rate loan for three years and get the annual package fee waived in the first year. Available for borrowers with 10% deposits.
IMB Fixed Rate Home Loan
1.97%
2.81%
$449
$6 p.a.
95%
$57,959.5
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
Suncorp Back to Basics Home Loan
2.44%
2.45%
$0
$0 p.a.
80%
$46,119.67
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
Well Home Loans Balanced Variable
2.17%
2.2%
$250
$0 p.a.
80%
$52,723.37
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee.
Virgin Money Reward Me Fixed Rate Home Loan
1.94%
2.77%
$300
$10 p.a.
80%
$59,231.26
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 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 May 2021 and settle by 27 August 2021.
Bank of Melbourne Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$44,577.54
Up to $4,000 refinance cashback
A competitive variable rate loan. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Fixed Home Loan
1.95%
2.17%
$250
$0 p.a.
90%
$58,717.98
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
homeloans.com.au Low Rate Home Loan with Offset
2.24%
2.26%
$0
$0 p.a.
90%
$51,666.66
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.
BankSA Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$44,577.54
Up to $4,000 refinance cashback
A competitive variable rate loan from BankSA. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
CUA Achieve Variable Home Loan
2.35%
2.4%
$600
$0 p.a.
95%
$47,461.97
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
BankSA Advantage Package Fixed Home Loan
1.89%
3.43%
$0
$395 p.a.
80%
$60,425.96
Up to $4,000 refinance cashback.
Fix to a low rate for two years and forget about rate rises. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Bank of Melbourne Advantage Package Fixed Home Loan
1.84%
3.38%
$0
$395 p.a.
80%
$61,977.38
Up to $4,000 refinance cashback
Get a competitive home loan rate for two years. Requires at least a 20% deposit. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
loans.com.au Fixed
1.99%
2.7%
$0
$0 p.a.
80%
$57,788.68
Home buyers can lock in this low fixed rate for two years. This loan also allows extra repayments. Requires a 20% deposit.
Heritage Bank Fixed Rate Home Loan
2.19%
4.23%
$600
$8 p.a.
95%
$52,015.55
Get a partial offset account and the option to make interest-only repayments.
Athena Variable Home  Loan
2.24%
2.21%
$0
$0 p.a.
70%
$51,666.66
A low variable rate for owner occupiers with 30% deposits. No upfront or ongoing fees.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.28%
3.84%
$0
$395 p.a.
95%
$50,169.12
$2,000 refinance cashback
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
IMB Budget Home Loan
2.58%
2.64%
$449
$0 p.a.
80%
$41,037.62
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
Well Home Loans Balanced Fixed Home Loan
2.29%
2.29%
$250
$0 p.a.
90%
$49,409.46
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
homeloans.com.au Low Rate Home Loan with Offset
2.69%
2.52%
$0
$0 p.a.
80%
$39,066.37
A competitive rate with no application or ongoing fee. This loan is not available for construction.
UBank UHomeLoan Fixed
2.14%
2.35%
$0
$0 p.a.
80%
$54,408.06
A one year fixed rate offer with no ongoing bank fees.
Heritage Bank Discount Variable Home Loan
2.59%
2.64%
$600
$0 p.a.
80%
$40,824.07
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
UBank UHomeLoan Fixed
2.14%
2.71%
$0
$0 p.a.
80%
$54,408.06
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Heritage Bank Advantage Package Fixed
2.39%
3.15%
$0
$350 p.a.
95%
$46,954.14
Get a partial offset account and flexible repayments with this package loan.
Athena Variable Home  Loan
2.54%
2.54%
$0
$0 p.a.
60%
$43,314.23
Investors with large 40% deposits or equity can get this low variable rate. A competitive option for investors looking to refinance.
Well Home Loans Balanced Fixed Home Loan
2.04%
2.17%
$250
$0 p.a.
90%
$56,278.33
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
loans.com.au Smart Booster Discount Variable Home Loan
1.99%
2.71%
$0
$0 p.a.
80%
$57,788.68
If you have an owner occupier loan with loans.com.au you can also get this very low rate variable mortgage for your investment property. Principal and interest repayments. Add an offset account for an additional 0.10% on your interest rate.
Macquarie Bank Basic Fixed Home Loan
2.19%
2.53%
$0
$0 p.a.
80%
$53,040.06
Borrow up to $750,000 with this basic 3 years fixed rate home loan. Refinancers can switch with a convenient digital application.
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$43,171.24
$2,000 cashback.
With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get a $2,000 cashback (terms, conditions & exclusions apply)
homeloans.com.au Low Rate Home Loan with Offset
2.39%
2.41%
$0
$0 p.a.
80%
$47,514.42
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.
Newcastle Permanent Building Society Real Deal Home Loan
2.59%
2.63%
$595
$0 p.a.
80%
$41,047.16
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
Bankwest Complete Home Loan Package Variable
2.55%
3.01%
$0
$395 p.a.
80%
$42,224.86
$2,000 refinance cashback.
Eligible customers who apply to move their home loan to Bankwest by 30 June 2021 can get a $2,000 cashback. To qualify you must refinance a minimum loan amount of $250,000 or more with an LVR of 80% or lower. The loan must be funded by 31 August 2021 (other terms, conditions and exlcusions apply).
IMB Budget Home Loan
2.68%
2.74%
$449
$0 p.a.
95%
$38,187.43
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
homeloans.com.au Low Rate Home Loan with Offset
2.59%
2.61%
$0
$0 p.a.
90%
$41,903.57
Save on interest with a free 100% offset account and buy your property with just a 10% deposit. This loan is not available for construction.
Virgin Money Reward Me Variable Home Loan
2.59%
2.76%
$300
$10 p.a.
60%
$41,255.02
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 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 May 2021 and settle by 27 August 2021.
Bank of Melbourne Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$43,171.24
$2,000 cashback
A competitive variable rate loan. Refinancers borrowing $250,000 or more can get a $2,000 cashback (Other terms, conditions and exclusions apply).
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.19%
3.72%
$0
$395 p.a.
95%
$52,645.06
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
IMB Fixed Rate Home Loan
2.49%
3.36%
$449
$6 p.a.
90%
$43,584.09
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.38%
4.11%
$595
$0 p.a.
90%
$46,959.7
$2,000 refinance cashback
Competitive fixed rate for home buyers.Available with a 10% deposit.$2,000 cashback for eligible refinancers borrowing $250,000 or more.
Well Home Loans Balanced Variable
2.52%
2.55%
$250
$0 p.a.
90%
$43,021.3
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month. Not available for construction purposes.
Newcastle Permanent Building Society Premium Plus Package Home Loan
2.94%
3.34%
$0
$395 p.a.
95%
$31,486.78
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Virgin Money Reward Me Variable Home Loan
2.5%
2.67%
$300
$10 p.a.
60%
$43,798.03
A variable rate loan for owner occupiers with a 40% deposit (or equity).
HSBC Home Value Loan
2.54%
2.55%
$0
$0 p.a.
90%
$43,314.23
A competitive value home loan with no ongoing fee.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.29%
3.94%
$595
$0 p.a.
95%
$49,464.79
$2,000 refinance cashback
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
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