Reasons to refinance your home loan

What Is Home Loan Refinancing?

Rates and Fees verified correct on December 12th, 2016

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 December 12th, 2016.

CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)

Comparative rate decreases by 0.03%

November 29th, 2016

UBank UHomeLoan Variable Rate - Standard Variable Rate (Investor with Investor Extra Offer P&I)

Comparative rate decreases by 0.10% | Interest rate decreases by 0.10%

December 2nd, 2016

UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)

Comparative rate increases by 0.10% | Interest rate increases by 0.10%

December 2nd, 2016

View latest updates

Jodie Humphries Jodie
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
loans.com.au Essentials - Variable Refinancers Only (Owner Occupier, P&I)
A low-interest rate loan suited for refinancing with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 20%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 80% Go to site More info
CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Borrow up to 90% LVR and enjoy an introductory rate for the first 2 years.
3.69% 3.87% $600 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.84% 4.66% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A discounted rate with 100% offset account. NSW, QLD and ACT residents only.
3.89% 4.27% $0 $375 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
Buy a new home even if you haven't yet sold your existing one with the bankmecu Bridging Loan
3.69% 4.24% $0 $350 p.a. 95% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.64% 4.39% $445 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <70%
An investment home loan with competitive rate and 100% offset account.
3.79% 3.79% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.74% 4.40% $0 $375 p.a. 85% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.09% 4.81% $0 $0 p.a. 95% Go to site More info
AMP Essential Home Loan  -  Owner Occupier
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.98% 4.00% $350 $0 p.a. 90% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.74% 4.09% $0 $350 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
Switzer Fixed Rate Home Loans - 2 Years Fixed Rate
A competitive 2 year fixed rate with your very own lending service manager.
3.97% 3.99% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.69% 4.56% $600 $0 p.a. 95% Go to site More info
loans.com.au Fixed - 2 Year Fixed (Owner Occupier)
Another low interest rate offer from loans.com.au. No application fee to pay.
3.89% 3.72% $0 $0 p.a. 90% Go to site More info
3.89% 3.89% $0 $0 p.a. 80% Go to site More info
Switzer Investment Loan
An investment loan with no application or ongoing fees, and your very own lending service manager.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
100% offset account, unrestricted additional repayments and no monthly account keeping fees
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier)
No application or ongoing fees and a competitive 2 year fixed rate.
3.84% 4.75% $0 $0 p.a. 95% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Suncorp Home Package Plus Fixed - 3 Year Fixed Rate (Special Offer $150k+ LVR <=90% Owner Occupier)
Lock in a special offer rate for 3 years for loans over $150k with LVR below 90%.
3.64% 4.26% $0 $375 p.a. 90% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
3.99% 4.97% $0 $395 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info

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.

Was this content helpful to you? No  Yes

Related Posts

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

2 Responses to What Is Home Loan Refinancing?

  1. Default Gravatar
    Derrick | November 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
      Marc | November 19, 2013

      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.

Ask a question
feedback