Home Loan

How to refinance a home loan

Your home loan will likely be one of the biggest financial commitments you’ll make in your life. So, you want to make sure you’re at the best interest rate possible, so you’re not paying more for your loan than you should. 

But while you might have got a great deal a few years ago, there’s a good chance it’s not as competitive as it once was.  

That’s because Australia’s mortgage market has dozens of lenders, each fighting hard to grow their loan book.

There are two ways lenders commonly do this.

The first way is to aggressively discount their standard variable home loan rate for new customers to win their business. As a result, existing customers end up paying more than new borrowers – effectively being penalised for their loyalty. 

The second way is to lure borrowers away from their rivals by offering them tempting cashback deals when they refinance a home mortgage. 

The good news is that it’s never been easier to refinance a home mortgage.  and switch it for a more competitive deal. 

Refinancing onto a lower rate can save you money by slashing your monthly repayments and, more importantly, the total interest paid over the life of your loan. 

But while securing a lower interest rate on your home loan can save you money, it’s not the only reason you should consider switching your mortgage. 

That’s because it’s important your mortgage works with, not against, your financial goals. But life doesn’t stand still. So, your existing home loan might not be as good a fit as it once was.

Seven other reasons you might want to refinance a home mortgage

For the right borrower, home loan refinancing can deliver significant benefits such as helping you:

  • Become mortgage-free faster by switching to a loan with a shorter term
  • Get a loan with better features, such as an offset account or redraw facility 
  • Change from a variable-rate loan to a fixed-rate loan (or vice versa)
  • Consolidate several high-interest debts into one lower-rate debt
  • Pull out equity in your property, so you can spend it on other things (such as a deposit for an investment property)
  • Increase your borrowing power (if your financial situation has improved since you first took out the loan)
  • Switch to a lender with better customer service

That said, refinancing isn’t always the right option for every borrower. 

For example, if your financial situation has changed for the worse since you first took out your loan or your property’s value has dropped, you might struggle to get approved for a new loan. 

Being rejected on a home loan application can damage your credit score, making it more challenging to get credit in the future. 

At Loan Station, we take the time to understand your individual financial position and long-term goals so we will only recommend you refinance if it’s the right decision for you. 

Request a call back from one of our friendly team by filling in this online form. 

How much does it cost to refinance a home mortgage?

Generally, you can expect to pay some or all of the following costs when you refinance a home mortgage:

  • Discharge fees on your existing loan 
  • Break fees on your existing loan (if it’s fixed) 
  • Application fees for your new loan 
  • Mortgage registration and transfer fees for your new loan 
  • Valuation fees for your new loan 
  • Legal fees for your new loan 
  • Lender’s mortgage insurance premium (if you are borrowing more than 80% of the property’s value with your new loan)

So, as with any financial decision, it’s important to crunch the numbers to see if the benefits of refinancing outweigh the costs.

Your step-by-step guide to refinancing your home loan

Refinancing your home loan can be a smart move under the right circumstances. But what exactly is the step-by-step process for refinancing a home loan?

Step 1: Review your current home loan 

Pay particular attention to:

  • Your current interest rate
  • Your ongoing or annual fees 
  • The amount of time left on your loan’s term 
  • How much it will cost to exit the loan 

Step 2: Shop around so you can find the best refinance home loans

Remember, a good home loan is about more than its interest rate. You should also compare:

  • Fees 
  • Features
  • Flexibility

Step 3: Do your sums to make sure you will save money in the long run 

You can use a home loan refinance calculator to help you with this.

Also, a good mortgage broker that’s experienced in refinancing, such as Loan Station, can help you crunch the numbers. Request a call back from one of our friendly team by filling in this online form. 

Step 4: Apply for a new loan

While each lender will have different requirements, you generally need the following documentation when you refinance a home mortgage:

  • Your last two payslips if employed
  • The last two years of tax returns if self-employed 
  • Three months of bank statements
  • Details of your current home loan
  • Details of your property
  • Personal identification 

Once you’ve been approved, your new lender will arrange settlement with your existing lender.

How do you find the best refinance home loans?

If you are sold on the many potential benefits of refinance a home mortgage, you are likely wondering how you can find the best refinance home loans.  

After all, making sense of all your options in Australia’s crowded mortgage marketplace can be challenging and time-consuming. 

You don’t just have to compare thousands of different loan products on the market; you also have to work out which lenders are most likely to approve someone in your financial position, 

To make matters more complicated, lenders change their eligibility criteria regularly and use all sorts of jargon. 

What’s more, the right home loan for you will not necessarily be the one with the lowest rate. For example, it could still be a smart move to refinance a home mortgage to a new loan with the same interest rate if it comes with lower fees, better features or more repayment flexibility.

An expert mortgage broker, such as Loan Station, can help you navigate this maze, making the process as stress-free as possible.   

That’s because a good broker won’t just scour the market to find you the best refinance home loans. They will also:

  • Have relationships with many lenders and understand their products inside out
  • Take the time to understand your unique circumstances so they can match you to the right lender and the right product
  • Run the numbers on all your options so you can be confident you’re getting the best deal for your particular situation
  • Hold your hand throughout the process, giving you expert advice every step of the way

    Want to save money on your home loan?

    Fill in this form and one of our lending professionals will be in touch to discuss how refinancing could put you in a better financial situation.

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