October 02, 2024 by Nicolle & Mathew Steinert
Refinancing your home loan regularly can feel like a hassle, but you may find a better deal that saves you money in the long run.
Having a home loan doesn't mean you're obliged to stay with that specific lender or loan for the life of the mortgage.
Refinancing involves switching your existing loan for a new one, either with your current lender or a different one. There is high competition among lenders in the home loan market, and often try to entice borrowers with incentives like low rates and cashback offers. Usually, these incentives are available only to new customers only, which means that existing customers could be missing out.
Australians with home loans pay, on average, 0.41% more than customers with new loans. Keeping those new customer rates can mean that you could make savings of up to $1,799 per year, or up to $44,998 across the life of the loan. [1]
What's the point of refinancing?
There are many reasons why people choose to refinance. Five of the most common reasons are:
- Secure a better interest rate.
- Change your loan structure, e.g. from a variable interest rate to a fixed interest rate.
- Consolidate other debts that have a higher rate of interest, e.g. credit cards and personal loans.
- Switch to a loan that offers more features (or to a more basic loan that may cost less).
- Unlock equity in your home loan to finance a renovation, take a holiday, or use a deposit to purchase an investment property.
Is it time to review your current home loan?
Mortgage Choice Mitcham & Happy Valley will evaluate your current loan and compare its rates, fees and features with thousands of other products to check that you have the loan that's best for you.
Even if you're not ready to refinance right now, you can still meet with your broker annually to ensure your loan still meets your needs.
Is a cashback offer better than a low rate?
Cashbacks are incentives that lenders offer to encourage you to refinance your loan with them. Depending on the lender, the cashback can be up to a few thousand dollars.
There are eligibility requirements that applicants must meet to receive the cashback offer. Each lender has its own criteria, and you will need to apply for a refinance within the offer period. If you do receive this money, it doesn't have to be used on your mortgage—it is paid to you as cash after your refinance is complete.
These cashback offers can be tempting and may, in some cases, cover the cost of switching to a new lender. However, if the lender's rate or loan features are not better than your current ones, they are not worth your effort.
Mortgage Choice Mitcham & Happy Valley can help you compare your options and determine which home loan will be best for you in the long term, not just the short term.
Is it better to stay with my lender or go to a different lender?
The easiest way to negotiate a better deal is to talk with your current lender, which is usually recommended as the first step. Mortgage Choice Mitcham & Happy Valley will contact your lender on your behalf to negotiate a better rate. However, if your lender is unwilling to offer a better rate, we will search for more competitive deals from other lenders.
How much does it cost?
Every customer and home loan is different; however, some costs are standard when refinancing. Mortgage Choice Mitcham & Happy Valley can help you make an informed decision by estimating these costs and weighing them against the benefits of switching your loan.
Some of the costs you might be charged if you refinance your home loan include:
- Borrowing costs from your new lender, such as a loan application fee, valuation fee, and settlement fee.
- Lender's Mortgage Insurance (LMI) if you borrow more than 80% of your home's value.
- Mortgage Registration Fee for registering your new mortgage on to the title record for the property
- Break costs if you refinance a fixed-rate loan before the fixed term is up
What's the process?
Once you decide on a loan, refinancing is similar to applying for your original loan.
Once you have chosen the lender you feel is the best fit, you apply for a new home loan with them. Each lender will require financial information that supports your application. These include recent payslips, tax returns, your latest council rates notice, evidence of building insurance on your property, and records of any other money that you owe, such as credit card statements. Once your loan is approved and settled, your new lender pays out your loan to the previous lender on your behalf, and you begin repaying the new loan.
Get in touch
If you're considering refinancing your home loan, please get in touch with Nicolle on or Mathew on . We'd love to help you review your current homoe loan and search for a better deal.
[1] Uses RBA data from April 2023 for the difference between new and existing loans. Calculated based on savings on a $600,000 loan across a 25-year period. Your situation may be different.
