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Should I refinance my home loan now?

Should you refinance your home loan now that interest rates are so low? The answer is probably yes, but here's what you need to know.

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Is now a good time to refinance your home loan? Well, for most borrowers it probably is. Interest rates have never been lower, and that could be the case for quite a while thanks to the economic downturn caused by the coronavirus pandemic.

But every borrower needs to look at their situation and make a choice that's right for them. Ask yourself the following questions before refinancing:

  • How low is your current interest rate? Compare and see if you could be getting a better deal.
  • Are you on a fixed rate? Do you want to fix?
  • Do you own at least 20% of your property? If your equity is less than 20%, refinancing might be expensive.

Refinancing can seem confusing but it's really just a case of working out what your options are, finding a better deal and then applying for the new loan. To make it easier for you we've outlined the most common borrower scenarios below and given you some tips to make a better decision.

My interest rate is too high

This is the most straightforward case. If your interest rate is high, then switching to a better deal will save you a lot of money. Here's a quick example:

  • Your current loan amount: $350,000
  • Current interest rate: 3.45%
  • Current monthly repayment: $1,561
  • New interest rate: 2.59%
  • New monthly repayment: $1,399

In this example, refinancing would save you $162 a month or $1,944 a year.

Compare rates and learn how to refinance

I want an offset account

Offset accounts are one of the most useful features on a mortgage. They allow you to save and spend money like an ordinary transaction account, but every dollar that sits in the account offsets your loan principal.

In other words, it makes your loan amount smaller and therefore means you pay less interest. Your monthly repayments usually stay the same, but you pay less interest and therefore repay the loan faster.

Offset account savings calculation

  • You have a $400,000 home loan and it's your second year (30-year loan term)
  • Your interest rate is 3.00%
  • You have $15,000 in savings, which you add to the offset account
  • Savings: You will pay $18,887 less in interest and finish your loan in 29 years and 1 month

If your current home loan lacks an offset account and you have some extra cash, refinancing to one that has an account could save you a lot in interest.

Learn more about offset accounts

I want to lock in a low rate and forget about it

Fixed rates are very, very low right now. In many cases, they're even lower than variable rates (but this could change).

Now variable rates could drop further, of course. But if you find a great fixed rate deal and want to lock it in and not worry about looking at your repayments for a while, refinancing is not a bad idea.

Just be aware that once you fix, you're locked in. You can't take advantage of low variable rates until the fixed period ends. Well, you can, but there are break costs involved.

I'm currently on a fixed rate loan and want to break it

Let's say you're stuck on an older fixed rate loan that's now very high compared to better options on the market. You can refinance to a new, lower rate, but you need to check what the costs of breaking your fixed rate loan are first.

If these costs are high then they might outweigh the benefits of refinancing to a cheaper loan. Here's a quick example:

You have a three-year fixed rate loan with an interest rate of 4.12%. Your loan amount is $400,000. You are two years into your fixed rate and you want to switch to a 2.80% variable rate loan.

Switching would save you $294 a month, or $3,528 a year. However, you ask your current lender to calculate your breaking costs and they estimate it will cost you $4,800 (this varies due to many factors and this is just a hypothetical example).

This means that you'll end up paying $1,272 more just to break your loan. If you wait until your fixed period ends (or gets shorter) you could incur a smaller cost and get a bigger saving.

Learn how fixed rate breaking costs are calculated

I want to access some extra cash

A lot of people refinance a home loan so that they can borrow a bit more money. They can use the money for investments, to fund a home renovation or to buy a car. With rates being so low, refinancing to a cheaper rate and borrowing a little more can be quite cost-effective. It will probably cost you less than taking out a separate car loan, for example.

And if you don't want to go through an entire refinance, you could also consider asking your current lender for 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.

I don't have much equity

Think carefully about refinancing if you don't own more than 20% of your property's current value. In other words, if you bought the property with a small deposit (say, 10%) and haven't been repaying the loan for long, refinancing could be expensive.

You probably already paid lenders mortgage insurance on your initial loan. If your equity is still below 20% then you may have to pay it again. That could cost you thousands.

And if property prices have fallen recently, your property could be worth less, making this even worse. Read our guide on refinancing in negative equity to learn more.

I'm struggling with mortgage repayments

It's very hard to refinance if you're in financial distress. This is because you need to apply for a new home loan with a new lender. The lender will examine your finances and your spending. If you've lost income or your debts have risen significantly, you might have your application rejected.

If you're in this situation, you're better off focusing on getting your debt, income and spending under control.

Still not sure if you should refinance? Talk to a mortgage broker

If you need some expert guidance on the refinancing question, especially if you're in a unique financial situation (or just a bit confused) then you can talk to a mortgage broker.

Chatting to a broker is free and they can guide you through the complexities of refinancing.

Get in touch with a qualified mortgage broker


Switch to a more competitive rate today

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.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $250,000 or more can get a $2,000 cashback per property (Other terms, conditions and exclusions apply). A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
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 Rate With Wealth Package (Owner Occupier, P&I, $150k+)
2.29%
3.99%
$0
$395 p.a.
95%
A competitive fixed rate package loan for home buyers. $2,000 cashback offer for eligible refinancers.
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.
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.
Virgin Money 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.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR <=80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
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.
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.
Bank of Melbourne Basic Home Loan - Special Offer (Owner Occupiers, P&I) LVR above 60% up to 80%
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $250,000 or more can get a $2,000 cashback per property (Other terms, conditions and exclusions apply). A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
HSBC Home Value Loan - Promotional Offer LVR 90% (Owner Occupier, P&I)
2.80%
2.81%
$0
$0 p.a.
90%
A competitive value home loan with no ongoing fee.
Virgin Money 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.
Bluestone Prime Direct (Owner Occupier, P&I)
2.59%
2.86%
$590
$15 monthly ($180 p.a.)
70%
Bluestone's Prime Direct is a competitive variable rate home loan for borrowers with 30% deposits.
BankSA Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
2.64%
2.66%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Refinancers borrowing $200,000 or more can get a $2,000 cashback per property (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
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.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
2.94%
2.95%
$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.
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)
2.22%
2.46%
$250
$0 p.a.
90%
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
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.
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner occupier, P&I)
2.49%
4.12%
$595
$0 p.a.
90%
Investors can take advantage of a short term fixed rate with no ongoing fees.
Greater Bank Great Rate Home Loan - Discounted 1 Year Fixed LVR ≤80% ($150K+ Owner Occupier)
2.09%
3.53%
$0
$0 p.a.
80%
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 - 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.
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. Not available for construction purposes.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
Enjoy a discounted fixed rate and the ability to package the loan with other financial products.
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.
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 Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.27%
2.45%
$250
$0 p.a.
90%
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
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)
2.39%
3.14%
$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.
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. Not available for construction purposes.
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.
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)
2.39%
3.08%
$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 10% 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.
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.
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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Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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