Refinance and stop paying the loyalty tax
If your home, car or personal loan rate has drifted up, refinancing could cut repayments or help you pay off sooner.
How it helps
Lenders often save their best rates for new customers. After a few years you could likely do better elsewhere, or with your lender once they know you’re shopping around.
Your broker weighs savings against switching costs like break or discharge fees, so you only refinance when it makes sense.
What’s included
- Lower your rate and repayments
- Release equity for renovations or investment
- Consolidate debts into your home loan
- Switch between fixed and variable
- Get features like an offset account
When a mortgage broker helps you refinance a home loan, they’re legally required to act in your best interests and explain why the new loan suits you.
When refinancing makes sense, and when it doesn't
Refinancing makes sense when savings clearly outweigh switching costs, for example when a fixed rate ends or you want an offset or equity. It may not if break costs, repeat LMI or a soon sale apply, or a longer term adds interest.
Read the full explanation
Refinancing tends to make sense when the savings over the time you plan to keep the loan clearly outweigh the cost of switching. Common triggers include a fixed rate ending, your rate drifting above what new customers are offered, wanting an offset account, or needing to release equity for renovations. It can also help if your property has grown in value, as a lower loan-to-value ratio may open up more options with some lenders.
It may not be worth it if you are part way through a fixed term with large break costs, if you would need to pay lenders mortgage insurance again, or if you plan to sell soon. Extending your loan back to 30 years can also lower repayments while increasing total interest. Your broker must act in your best interests, which includes weighing these costs, and may suggest asking your current lender for a better deal first.
- Borrowers with a fixed rate ending soon
- Homeowners who haven’t reviewed in years
- People releasing equity for renovations or investment
- Borrowers wanting an offset account or redraw
Pros and watch-outs
Pros
- May reduce your rate and repayments
- Features your current loan lacks
- Release equity for renovations, investment or other goals
- Restructure into fixed, variable or split
Watch-outs
- !Switching costs can reduce or cancel out savings
- !Resetting the term can increase total interest
- !Requires a new credit assessment and paperwork
Costs and fees to compare
The interest rate is only part of the cost. Ask your broker to show these side by side.
Discharge fee
Your lender may charge to close the loan and release the mortgage. Ask the amount.
Break costs
Leaving a fixed loan early can trigger break costs. Get a written estimate first.
New loan fees
Application, valuation and settlement fees may apply; some lenders waive them for refinancers.
Lenders mortgage insurance
Owe more than 80% of the value and you may pay LMI again.
Government registration fees
State or territory fees apply to discharge the old mortgage and register the new.
Tips to strengthen your application
- 1Know your rate, balance, fees and fixed expiry first.
- 2On a fixed rate, get a written break cost estimate.
- 3Keep repayments the same after refinancing to pay down faster.
- 4Start six to eight weeks before a fixed rate ends.
What happens next
Review
Your broker looks at your current loan and goals.
Compare
Your broker compares lenders, including a counter-offer from your current lender where possible.
Apply
We prepare and lodge the application for you.
Switch
We coordinate the payout of your old loan and settlement of the new one.
Common questions
Does refinancing cost anything?
There can be costs, such as discharge fees, break fees on fixed loans and new loan fees. Your broker includes these when calculating whether refinancing is worth it.
Can I refinance a car loan?
Yes. Car and personal loans can often be refinanced too, especially if your credit has improved since you first borrowed.
How long does it take?
Home loan refinances usually take two to four weeks. Car and personal loans can be faster.
How often can you refinance a home loan?
There is no set limit, but each refinance involves costs and a credit enquiry. Refinancing too often can make lenders cautious, so it is usually worth doing when the savings or benefits are clear.
Can I refinance if my property value has dropped?
Possibly, but a lower value means a higher loan-to-value ratio, which may limit your options or bring in lenders mortgage insurance. Your broker can check how lenders are likely to value the property before you apply.
Should I ask my current lender for a better rate first?
It is often worth asking. Some lenders will reprice your loan to keep your business, which avoids switching costs. Your broker can help you compare any offer with what other lenders on their panel might provide.
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