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
$
% p.a.
years
Name Product Interest Rate (p.a.) Comp. Rate^ Application Fee Ongoing Fees Maximum Insured LVR Amount Saved
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.
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
80%
$43,171.24
Up to $4,000 refinance cashback. With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 80% of the property's value (terms, conditions & exclusions apply).
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.
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.
HSBC Fixed Rate Home Loan
1.88%
2.98%
$0
$0 p.a.
80%
$61,434.54
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
Suncorp Back to Basics Home Loan
2.54%
2.55%
$0
$0 p.a.
80%
$43,314.23
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$64,892.81
This very low fixed rate is only available until 26 February 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit
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.
Suncorp Home Package Plus Fixed
1.89%
2.94%
$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.
Well Home Loans Balanced Fixed Home Loan
1.94%
2.18%
$250
$0 p.a.
90%
$58,987.91
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
St.George Fixed Rate Advantage Package
2.09%
3.46%
$0
$395 p.a.
95%
$55,020.05
Lock in a low fixed rate for the first two years. Refinancers borrowing $250,000 or more can get cashbacks between $2,000 and $4,000 depending on their loan to value ratio (Other terms, conditions and exclusions apply
Westpac Fixed Option Home Loan Premier Advantage Package
2.09%
3.5%
$0
$395 p.a.
95%
$55,375.62
Up to $3,000 refinance cashback.
Competitive fixed rate home loan. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
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 fee. This loan is not available for construction.
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. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Fixed Rate Home Loan
2.04%
2.79%
$300
$10 p.a.
80%
$56,525
$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 26 February 2021 and settle by 28 May 2021.
HSBC Home Value Loan
2.59%
2.6%
$0
$0 p.a.
80%
$41,903.57
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
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.
St.George Basic Home Loan
2.59%
2.61%
$0
$0 p.a.
90%
$41,759.64
Up to $4,000 refinance cashback.
With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get up $4,000 cashback and borrow up to 90% of the property's value. (Terms, conditions & exclusions apply).
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.
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.
Bank of Melbourne Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
80%
$43,171.24
Up to $4,000 refinance cashback
A competitive variable rate loan from Bank of Melbourne. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
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.
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.
Bank of Melbourne Advantage Package Fixed Home Loan
2.09%
3.46%
$0
$395 p.a.
95%
$55,240.95
Competitive fixed rate loan. Refinancers borrowing $250,000 or more can get cashbacks between $2,000 and $4,000 depending on their loan to value ratio (Other terms, conditions and exclusions apply
BankSA Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
80%
$43,171.24
Up to $4,000 refinance cashback
A competitive variable rate loan from BankSA. Refinancers borrowing $200,000 or more can get a $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Fixed Home Loan
2.36%
2.39%
$250
$0 p.a.
90%
$47,462.04
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
2.59%
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.
Bank of Melbourne Basic Home Loan
2.59%
2.61%
$0
$0 p.a.
80%
$41,523.59
Competitive variable rate home loan. Refinancers borrowing $250,000 or more can get cashbacks between $2,000 and $4,000 depending on their loan to value ratio (Other terms, conditions and exclusions apply
Well Home Loans Balanced Fixed Home Loan
1.99%
2.17%
$250
$0 p.a.
90%
$57,635.86
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
BankSA Advantage Package Fixed Home Loan
2.09%
3.46%
$0
$395 p.a.
80%
$55,020.05
Competitive fixed rate loan. Refinancers borrowing $200,000 or more can get cashbacks between $2,000 and $4,000 depending on their loan to value ratio (Other terms, conditions and exclusions apply
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.
Athena Variable Home  Loan
2.29%
2.23%
$0
$0 p.a.
80%
$50,287.93
A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.
CUA Achieve Variable Home Loan
2.55%
2.6%
$600
$0 p.a.
95%
$41,836.97
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.
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 26 February 2021 and settle by 28 May 2021.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
2.59%
2.6%
$0
$0 p.a.
110%
$41,903.57
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.
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.
Athena Variable Home  Loan
2.84%
2.46%
$0
$0 p.a.
80%
$34,771.25
Owner occupiers can refinance to one of the most competitive interest-only rates in the market. No application fee and no ongoing fees.
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.
Virgin Money Reward Me Variable Home Loan
2.5%
2.67%
$300
$10 p.a.
60%
$43,798.03
$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 26 February 2021 and settle by 28 May 2021.
UBank UHomeLoan Fixed
2.29%
2.72%
$0
$0 p.a.
80%
$50,287.93
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
HSBC Home Value Loan
2.64%
2.65%
$0
$0 p.a.
90%
$40,487.62
A competitive value home loan with no ongoing fee.
UBank UHomeLoan Fixed
2.09%
2.3%
$0
$0 p.a.
80%
$55,770.62
A competitive 3 year fixed rate with no ongoing bank fees.
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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.

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