Home loan refinancing: a complete guide
Refinancing to a lower rate or to access equity needs to be weighed very carefully to ensu...
25 Nov, 2024
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.69% p.a. | 6.13% p.a. | $2,899 | Principal & Interest | Fixed | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.74% p.a. | 5.99% p.a. | $2,915 | Principal & Interest | Fixed | $0 | $0 | 80% | |||||||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure | |||||||||||
6.04% p.a. | 6.08% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 STAR CUSTOMER RATINGS |
| Promoted | Disclosure | |||||||||
6.09% p.a. | 6.11% p.a. | $3,027 | Principal & Interest | Variable | $0 | $210 | 80% | |||||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% | |||||||||||||
6.18% p.a. | 6.21% p.a. | $3,056 | Principal & Interest | Variable | $0 | $845 | 60% | |||||||||||||
6.24% p.a. | 6.48% p.a. | $3,075 | Principal & Interest | Variable | $250 | $250 | 60% | |||||||||||||
6.44% p.a. | 6.76% p.a. | $3,141 | Principal & Interest | Variable | $0 | $0 | 97% | |||||||||||||
6.79% p.a. | 6.87% p.a. | $3,256 | Principal & Interest | Variable | $8 | $350 | 70% | |||||||||||||
7.24% p.a. | 7.24% p.a. | $3,407 | Principal & Interest | Variable | $0 | $160 | 95% | |||||||||||||
8.80% p.a. | 8.94% p.a. | $3,951 | Principal & Interest | Variable | $8 | $600 | 95% | |||||||||||||
5.99% p.a. | 6.44% p.a. | $2,995 | Principal & Interest | Variable | $0 | $530 | 90% |
| Disclosure |
Important Information and Comparison Rate Warning
Important Information and Comparison Rate Warning
December Refinancing Home Loan Rates Top Picks
Mortgage holders have found solace from RBA cash rate hikes in recent months, and most experts now predict the next rate move will be a cut – apparently likely in early- to mid-2025.
Economists at CommBank still expect the first cut back in February, while those at ANZ, NAB, and Westpac have each pushed their predictions back to May.
With no immediate relief expected, it's more important than ever to shop around for refinancing deals. After all, securing a competitive mortgage can shorten the life of a home loan and potentially save borrowers tens of thousands of dollars in interest
Here are some of the best variable rate refinancing loan rates in our database at the time of writing.
Best Refinancing rates from our database
| Loan type | Product | Advertised rate % per annum | Comparison rate % per annum |
|---|---|---|---|
| Variable rate | Arab Bank Basics Home Loan - Special Offer - LVR ≤60% |
5.75% | 5.88% |
| Fixed rate | Loans.com.au Three year fixed - LVR ≤90% |
5.69% | 6.16% |
| High LVR home loan | Community First Bank Basic Variable Home Loan - LVR ≤95% |
5.94% | 5.99% |
| Offset home loan | Horizon Bank Home Sweet Home Loan - LVR ≤70% |
5.89% | 6.59% |
| Green home loan | Reduce Home Loans Eco Home Loan - LVR ≤60% |
5.84% | 5.89% |
Rates correct as of 2 December. Rates may differ to comparison table above.
What is home loan refinancing?
Just because you've signed a home loan agreement, doesn't mean you're stuck with it. If you're not happy with your mortgage deal, or you want access to a better one, you might be a prime candidate for refinancing.
Refinancing sees a borrower switch from one home loan product to another, whether that be with the same lender or a different one entirely.
There are two main reasons people refinance their home loans: to get a lower rate and/or more features or to withdraw home equity.
If your home loan has been left unchecked for quite some time, it might've begun to pale in comparison to others. For that reason, it's a good idea to regularly compare your mortgage to others available on the market to ensure you're getting a great deal.
What are the benefits of refinancing?
Refinancing your home loan can offer several advantages. Here are some common reasons for refinancing and the benefits they can offer:
|
I want to |
How refinancing can get you there |
|---|---|
|
Secure a better interest rate |
Refinancing can help you get a lower interest rate on your home loan. If you're a mortgage-holder, chances are your home loan repayments are your biggest regular expense. Reducing the interest rate on your home loan can minimise that expense. If your current loan has a higher rate than other loans available, switching to a lower rate can reduce both your monthly payments and the total interest you pay over time. |
|
Get access to equity |
Refinancing can also give you access to the equity in your home. Equity is the difference between what your home is worth and what you owe on your mortgage. For example, if your home is worth $500,000 and you owe $200,000, you have $300,000 in equity. By refinancing, you can borrow against this equity to get cash, which you can use to pay for things like home renovations, a holiday, or even a deposit for another property. |
|
Access better features |
Different home loans come with different features. As your needs change over time, you might find yourself wishing for features that your current mortgage doesn't offer. For instance, you might want an offset account to reduce the interest you pay or the option to split your interest rate. If your current loan doesn't have these features, you can refinance to a loan that better suits your needs. |
How can refinancing save me money?
By refinancing your loan, you can reduce the amount of interest you pay.
That will have two effects: it will reduce the size of your regular repayments and minimise how much interest you pay over the life of your loan.
Every repayment a borrower makes is made up of two parts: principal and interest. By reducing the interest rate realised, a borrower can reduce the amount of interest they pay day-to-day and year-over-year.
Further, by extending the loan term, a borrower can reduce the amount of principal they repay each week, fortnight, or month. On the other hand, if they reduce the loan term, they will pay more of their principal balance back in each repayment and ultimately save on interest over the life of their loan.
So, how big of an impact can securing a lower interest rate have? Here's an example:
Let's say your current home loan interest rate is 6.80% p.a. and you owe $500,000 on a 30-year mortgage.
That would make your repayments $3,260 per month and leave you paying around $673,500 of interest over the life of your home loan.
That's well and good, but what if there was a better deal out there?
If you were to refinance your home loan to another lender offering an interest rate of 5.80% p.a., your monthly repayments could be slashed to around $2,935 a month - $325 less per month - and your total interest bill could drop to an expected $556,000 - saving more than $100,000 over the loan's life.
Here's a breakdown of how the repayments and interest accrued on a $500,000, 25-year home loan can vary depending on the interest rate applied:
|
Interest rate (p.a.) |
Monthly repayments |
Total interest paid |
|---|---|---|
|
5% |
$2,923 |
$376,885 |
|
5.5% |
$3,070 |
$421,131 |
|
6% |
$3,221 |
$466,452 |
|
6.5% |
$3,376 |
$512,811 |
|
7% |
$3,534 |
$560,169 |
|
7.5% |
$3,695 |
$608,487 |
Wondering how much you might save from refinancing? Use Your Mortgage's free Mortgage Repayment Calculator to crunch the numbers.
How much does refinancing cost?
Refinancing can save you money in the long term, but the process isn't free.
Before anything else, you should calculate the upfront costs you might have to pay before you set your heart on transitioning to a new lender.
Costs associated with refinancing can include:
-
Exit or break fees
-
Establishment fees
-
Settlement and handling fees
-
Lenders Mortgage Insurance (LMI) if your loan-to-value ratio (LVR) is more than 80%
See also: How much does it cost to refinance your home loan?
How to refinance a home loan?
To start your refinancing journey, you first need to compare your current home loan, its interest rate, and its features, to others available on the market.
It could even be wise to ask your current lender if they could strike you a better deal before you apply to another institution. You might be surprised at what they offer you.
Next, examine how much you could save through refinancing, and make sure to factor in the costs of doing so.
Once you have decided on the best home loan option for you, prepare all the needed paperwork, submit your application and documentary requirements, and wait for approval.
If you're switching lenders, your new and your old lender will work together to take care of much of the process after you're approved.
For a more detailed guide, check out Your Mortgage's resource for home loan refinancing: A Step By Step Guide To Home Loan Refinancing
Beginner's Guide to Home Loan Refinancing
Considering refinancing your home loan but unsure of where to start?
Your Mortgage’s guides are tailored for refinancing newcomers, offering insights to help you navigate the process, step-by-step, with confidence.
Check out these resources to help you evaluate your current loan terms against potential refinancing offers, prepare necessary documents, and understand the benefits of refinancing, like lowering your interest rate or accessing equity.
Document checklist for refinancing
10 questions you must ask your broker before refinancing
Understanding Refinancing Fees and Leveraging Home Equity
Understanding refinancing fees and leveraging home equity can be crucial in enhancing your mortgage.
Our guide provide insights into navigating refinancing fees effectively, helping you assess the costs involved and make informed decisions.
Learn how refinancing can enable you to unlock equity to fund renovations, holidays, investments, special events, or debt consolidation.
What fees are involved when refinancing a home loan?
Should you refinance to access equity on your home?
Refinancing Insights: Strategies, Credit Considerations, and Expert Tips
Discover the best strategies for your refinancing journey, whether you’re hoping to secure a better rate or tap into home equity.
Learn how a poor credit score may impact your refinancing options, find expert tips for managing expiring fixed rates and navigating the basics of cash-out refinancing.Accessing equity through refinancing
Can bad credit stop you from refinancing?
Can refinancing affect your credit score?
Frequently Asked Questions
When you refinance, you are simply switching your current mortgage product with another that better fits your financial condition. This means that you will only pay for one mortgage at a time.
Your new lender will transfer the funds you initially borrowed to your old lender, which means your old loan will be closed entirely. You will then repay the borrowed funds to your new lender.
There are many reasons a borrower might consider refinancing their mortgage.
The most common include securing a lower interest rate, reducing monthly repayments, accessing built-up equity, and making the most of additional loan features.
How much you could save by refinancing your home loan depends on numerous factors, not least how much lower an interest rate you could secure.
A small difference in interest can help you save a lot on your loan over the long term.
If you’re considering refinancing and want to make sure it’s worthwhile, you can use Your Mortgage’s free Mortgage Repayment Calculator to work out your potential savings.
How often you refinance your home loan is completely up to you. It's usually best to refinance as often as it makes sense to meet your financial needs.
This is especially true if your financial situation is changing quickly. For instance, if you’re paying down your mortgage faster than expected, you might soon be able to refinance to a lower-rate home loan that you previously weren’t eligible for.
However, you should consider the costs involved with refinancing, as it typically takes time to recoup these costs through interest rate savings.
You can refinance with as much or as little equity as you desire.
However, it's worth noting that if you don’t have at least 20% equity (meaning you own at least 20% of your property outright), refinancing your home loan might attract Lenders Mortgage Insurance (LMI).
Yes, you can generally refinance a fixed-rate loan. However, doing so within the fixed term will likely incur break costs.
For that reason, it might be worthwhile to wait until your fixed term ends to refinance.
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