Reasons to refinance your home loan

What Is Home Loan Refinancing?

Rates and fees last updated on

Refinancing is when you switch from one loan to another. Find out how it works here.

Jumping ship to a new home loan can be a great way to make sure your loan complements your lifestyle rather than making things harder.

When refinancing, you're simply moving from one home loan to another, and this can be with the same or a new lender. Refinancing can be when you simply move from your old home loan to a home loan with more features, or can refer to larger switches such as moving to a new lender and opting for a home loan with a shorter loan term and different interest rate types.

When you refinance, you can also save money on your regular repayments if you move to a lower interest rate.

You will have many choices when it comes to lenders and loans with low interest rates. There is a good chance that you will be able to receive a better interest rate from another lender. Use your negotiation skills to achieve a better deal with your current lender before you decide to switch. If your lender is reluctant to hand over the best interest rates, it may be time to consider switching lenders.

You can look at the table below to see what refinancing deals are currently on offer.

How much can you possibly save?

If you would like to know how much you can possibly save by refinancing, use the loan comparison calculator below. You may be surprised that you can get flexible features and a very low interest rate.

Here are some features to look out for, which will save you money:

  • Flexible repayments. This allows you to pay more on your loan; especially when you find yourself with extra cash. This helps to reduce the time it takes to pay off your loan as well as reduces the money owed on the loan.
  • Redraw. This allows you to withdraw your extra repayments at your discretion. Many variable loans have free redraws, usually with a minimum of $100-$1,000. Redraw usually isn't as seamless as using an offset account, as forms usually need to be completed to redraw, whereas no forms are required to withdraw from an offset account.
  • Flexible rate alternatives. This allows you to switch your loan from a variable rate to a fixed rate or the reverse. You can also split your loan into two, which gives you more manageability options to move interest rates from one place to the other.
  • Transferability. Also known as loan portability, this allows you to transfer your loan when you relocate to a new property; making the transition easier for you and your family.

Streamlining your debts

With debt consolidation, your high interest rate debts are combined into the one (typically lower) interest rate of a home loan. You will only have one repayment to manage each month, which can reduce your regular repayments to manageable levels.

Debt consolidation adjusts a short term debt – such as a personal loan and turns it into long term mortgage debt. Unless you set a goal to pay off the larger home loan as quickly as possible, using debt consolidation could lead to paying more interest, as interest has more time to accrue.

What about home equity and your investment goals?

Your home equity is the useable value of your home. It is calculated on the difference between the value of your home and the remaining balance on your mortgage. For example, if your home is valued at $500,000 and your remaining loan balance is $200,000, the equity in your home would then be $300,000. This is money that you can use for wealth building.

You can refinance your home to access the equity in your home for investment purposes such as buying a rental property, investing in the stock market or a managed fund. Your home loan is considered borrowed money, money used to invest with borrowings is called the process of 'gearing'. This strategy can provide you with a wide range of benefits. However, it also has some obvious risks. It is recommended that you discuss your best possible options with your financial planner and accountant.

About information on equity access

You don't even have to use your home equity for investment purposes. You can use it for a wide variety of reasons such as pay upfront university fees for your children, for an extended overseas holiday, or home repairs and cosmetic renovations.

The related costs

There are costs to refinance. Here are several important costs that you could incur:

The cost of borrowing: Even though your current lender may not charge fees to exit your loan, your new lender will usually have upfront fees. Some of these include:

  • Application fees
  • Valuation fees
  • Settlement fees
  • Legal fees

Lender's Mortgage Insurance (LMI): If the new loan is in excess of 80% of the value of your home, your lender may charge you lender's mortgage insurance. This provides protection to the lender in the event that you are unable to meet your loan repayment obligations. You can add this to the balance of your loan, but you will have to pay interest on your premium which increases the cost.

Ongoing fees: Some loans also charge annual or monthly fees you should be mindful of.

Exit fees

You may have to pay exit fees to your existing lender if you are on a fixed home loan. This is known as an early repayment cost. These costs vary with each loan. Borrowers should contact their lender for a quote to exit their mortgage.

About how to avoid exit fees

Stamp duty and associated fees

Australian states no longer tack on stamp duty to your mortgage if you add to the size of the loan.

Although, you may pay a mortgage transfer fee when refinancing. Our Stamp Duty Calculator helps you calculate how much you'll pay in transfer fees in your state.

Never sign on the dotted line of a loan contract prior to being aware of the costs associated with the loan.

Refinancing and LMI

During the life of your home loan you may find that there are better deals around, allowing you to save money or add on extra features. If this is the case then you may want to consider refinancing your home loan.

However if you are to refinance your home loan then you may find that there will be some instances in that you will have to pay LMI - usually if your Loan to Value Ratio (LVR) is more than 80% for standard home loans and 60% for low documentation loans.

If you are looking to refinance a home loan then you will have to be sure that you are able to borrow no more than 80% of the home value, because you don’t want to pay LMI on the same property twice.

If you are looking to refinance a home loan then you may be doing so for a host of reasons. Many people will look to refinance a home loan when they notice that there are other loans that are available that will allow them to save money and are better suited to their financial situation.

Questions to ask the broker

If you are thinking of using a mortgage broker to help you refinance, here are some of the questions to ask your broker.

  • How will you decide whether refinancing is right for me?
  • What is the process you follow when comparing and selecting loans for me?
  • How long have you been a mortgage broker for?
  • What additional fees could I expect to pay?
  • Can I get more loan features when I refinance? Do I need them?

It is always important to weigh up your reasons to refinance or stick with your current lender

Refinancing Home Loan Comparison

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.
3.49%
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.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
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.
3.73%
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.
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
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.
3.64%
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.
3.78%
3.79%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.69%
3.69%
$0
$0 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
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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Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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2 Responses

  1. Default Gravatar
    DerrickNovember 19, 2013

    My house just appraised at 217.000 I have mortgage 135.000 trying to get 2nd mortgage 10.000 or refinance do u do mortgage more than 65 percent or re do my mortgage I don’t care about interest rates.

    • Staff
      MarcNovember 19, 2013Staff

      Hello Derrick,
      thanks for the comment.

      Unfortunately we’re a financial comparison site and don’t offer any loans ourselves, so I won’t be able to help you answer that question. You may have to research some lenders which offer second mortgages and then enquire directly with them.

      Cheers,
      Marc.

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