Many Australians review their home loan every few years. Yet many stay with the same lender for a long time without checking their options.
More Australians are exploring refinancing options. This reflects rising interest rates, changing living costs, and new lending products entering the market.
What Does Refinancing a Home Loan Mean?
Refinancing is when you switch from your current home loan to a new loan, either with the same lender or a different lender.
The new loan pays out the old one. You then make repayments under new terms.
Home loan refinance benefits can include a lower interest rate, different loan features, or changes to your repayment structure. However, it depends on your situation and the costs involved.
Why Many Australians Consider Refinancing
Interest rates in Australia change over time. Lenders also adjust their pricing and product ranges.
If you took out your loan several years ago, your rate may no longer be competitive. Some lenders offer sharper pricing to attract new customers.
Other borrowers refinance because their lives have changed. Income, family needs, or investment plans may look different today compared to when the loan first started.
Signs It May Be Time to Review Your Loan
You do not need to refinance every year. However, certain signs suggest it may be worth reviewing your options.
Your Interest Rate Is Higher Than Current Offers
If your rate is noticeably higher than similar loans in the market, it may be time to compare.
Even a small difference in rate can change your monthly repayment. Over time, that difference may affect your overall loan cost.
Your Fixed Rate Is Ending
Many borrowers choose a fixed rate for two to five years.
When the fixed term ends, the loan usually moves to a variable rate. This rate may be higher than expected.
This period is a common time to review whether refinancing your mortgage may be appropriate.
You Want to Reduce Monthly Repayments
Rising living costs have placed pressure on household budgets.
Refinancing may allow you to change your loan term or interest rate. This could lower your regular repayment amount.
Keep in mind that extending your loan term may reduce monthly repayments but increase total interest paid over time.
You Want to Access Equity
As property values rise and you repay your loan, you build equity.
Some borrowers refinance to access equity for renovations, an investment purchase, or debt consolidation.
The lender will reassess your application, including your income, existing commitments and credit history, to determine whether you meet lending criteria and whether the proposed credit contract is not unsuitable for your circumstances.
You Want Different Loan Features
Loan features can vary between lenders.
Some loans offer offset accounts. Others allow additional repayments without penalty.
If your current loan lacks features that suit your needs, refinancing may provide access to a more appropriate product.
Understanding the Costs of Refinancing
Refinancing is not only about interest rates. There are costs to consider.
Discharge (termination) fee
Your current lender may charge a discharge or termination fee when your loan is closed.
Break costs (fixed-rate loans)
If your loan is on a fixed rate and you exit or make changes during the fixed period, break costs may apply. The amount can vary and may be substantial.
Application, valuation, settlement and government fees
Refinancing can involve application, valuation and settlement costs. There may also be government fees, depending on the loan and state requirements.
Before refinancing your home loan in Australia, it is important to weigh these costs against potential benefits.
How the Refinancing Process Works in Australia
Understanding the process can help you prepare.
Step 1: Review Your Current Loan
Start by checking your interest rate, loan balance, and remaining term.
Look at your recent statements. Confirm if you are on a fixed or variable rate.
Step 2: Compare Loan Options
When comparing home loans, it is important to look beyond the advertised interest rate. The comparison rate includes most upfront and ongoing fees, which gives a more accurate view of the total cost of the loan over time.
A finance professional can assess products from a range of lenders and review interest rates, comparison rates, loan features and fee structures. This allows you to see how each option may affect your repayments and long-term costs.
By reviewing the full picture, you can make a more informed decision about whether refinancing may provide a genuine financial benefit in your circumstances.
Step 3: Submit an Application
If you decide to proceed, you will complete a new loan application.
The lender will request documents such as payslips, bank statements, and identification.
They will also assess your credit history and serviceability.
Step 4: Property Valuation
The new lender usually arranges a property valuation.
This confirms the current market value of your home. It also helps determine your loan-to-value ratio.
Step 5: Settlement
Once approved, the new lender pays out your existing loan.
Your old loan account is closed. You then begin repayments with the new lender.
Refinancing in Western Australia
For homeowners in Perth and across Western Australia, market conditions may differ from those in other states.
Property values, rental demand, and local employment trends can influence lender assessments.
Working with a local finance brokerage such as FinanceCorp can help you understand how refinancing options in Australia apply to your situation and local market conditions.
Common Questions About Refinancing
How Often Can You Refinance?
There is no strict limit. However, frequent refinancing may incur repeated fees.
Many borrowers review their loans every two to three years, or when their fixed rate is ending.
Will Refinancing Affect My Credit Score?
Applying for a new loan involves a credit check.
Making several credit applications in a short period can negatively affect your credit score, as each application can create a credit enquiry on your report. It is wise to compare options carefully before submitting formal applications.
Can You Refinance If Your Circumstances Have Changed?
If your income has reduced or your debts have increased, refinancing may be more difficult.
Under Australia’s responsible lending obligations, credit licensees must make reasonable enquiries about your financial situation, requirements and objectives, take reasonable steps to verify your financial situation, and assess whether a proposed credit contract is not unsuitable.
Mortgage brokers are also subject to best interests obligations when providing credit assistance.
When Refinancing May Not Be Appropriate
Refinancing is not always the right move.
If you are close to paying off your loan, the cost of switching may outweigh potential benefits. If break costs are high on a fixed-rate loan, it may be prudent to wait until the fixed term ends.
If your financial position has weakened, approval may not be likely. This is why reviewing your circumstances carefully is important before making a decision.
Bringing It All Together
Refinancing your home loan is a financial decision that should be reviewed with care.
If your interest rate is no longer competitive, your fixed term is ending, or your financial goals have changed, it may be time to explore your options.
Benefits of refinancing a home loan can include lower repayments, access to equity, or improved loan features. However, refinancing costs and lender assessment criteria must also be considered.
If you are considering refinancing your home loan in Australia, speaking with a finance manager can help you understand what may be appropriate for your needs.
This article is for general information and educational purposes only and does not take into account your objectives, financial situation or needs. It is not a recommendation or an offer of credit. Any credit assistance is subject to a full assessment of your circumstances, lender criteria, fees, charges, and terms and conditions.
Ready to Review Your Home Loan?
If you are unsure whether refinancing your mortgage is right for you, the team at FinanceCorp can explain the refinancing process, compare options and costs, and (where appropriate) provide credit assistance after assessing your circumstances.
Based in Perth, Western Australia, FinanceCorp assists with home loans, investment property loans, refinancing, personal loans, and car finance. FinanceCorp operates under Australian Credit Licence 395037.
To discuss your options, contact FinanceCorp at 1300 410 784 to speak with a finance manager about refinancing options, costs, and the process, as well as whether a home loan review may be worth considering for your circumstances.
A review today may help you move forward with confidence and clarity about your next steps.