Home loan refinance

Q: Will I need to pay Lender’s Mortgage Insurance again?

If you originally used a low deposit home loan , it’s likely you paid LMI. When you’re looking to refinance a home loan and you’ve built up more than 20% equity in the property since you originally borrowed, you won’t need to pay LMI again. Use more than 80% of the equity in your home when you refinance, and you will be required to pay LMI .

Home loan refinance explained

Everything you need to know about home loan refinance, including how the process works, and how to compare mortgage interest rates, fees, and terms online

How does home loan refinance work?

It’s beneficial to periodically refinance your home loan as circumstances change. Many things affect interest rates, and when they change, it has implications for how much our home loans cost from month to month – but also across the lifetime of the term.

Refinancing your mortgage is relatively straightforward. You can use Savvy to compare the hundreds of home loan options out there with your existing deal. Once you’ve chosen a new option, the lender you switch to discharges your current mortgage, and then your home becomes security for a new loan with terms that better suit where you’re at right now.

Apart from getting a better interest rate and terms, homeowners utilise a switch from one home loan provider to another for many different things. That might be to pay for home improvements, buy a car, or to pay off costly debts like credit cards or unsecured finance. Some borrowers switch to a longer-term to get lower regular mortgage repayments when their financial situation changes, while others actually shorten their loan.

Why would I refinance my home loan?

There are many good reasons home owners might benefit from switching their mortgage:

Refinancing to save on repayments

A lot of Australian families are curious about refinancing their home loans. A fair proportion of those people often wonder – how much is this actually going to save me? Surely, we are only talking about a few dollars here and there? Yet, that couldn’t be further from the truth! A recent study by the Australian Bureau of Statistics found the national average saved as a result of refinancing is $259 per month.

It’s a sizeable sum, but it becomes even more significant given the relatively long time a mortgage runs. In the following example, just half a percent makes a difference of more than $36,000 and $100 each month during a 30-year $400,000 loan:

Interest rate	Term	Monthly	Total cost
2.5%	30 years	$1,580.48	$568,974.09
2%	30 years	$1,478.48	$532,252.04

Refinancing to pay for property investment

When thinking about home loan refinance, you could be considering buying another property at the same time. Suppose your loan-to-value ratio is reasonable. In that case, a bank or lender may agree to extend your mortgage to cover an investment property. Not only that, but if you currently have enough equity in your home, you can use that to provide the deposit for a second home or investment property, without dipping into your savings. Combine refinancing with an offset account that makes best use of your savings, and you could improve your financial situation massively overnight.

Refinancing to improve your home

Using a home loan refinance to pay for renovations at your property often makes sound financial sense. It can be far cheaper to borrow extra funds via your mortgage than to raise money using unsecured finance like a personal loan, for instance. If you plan to renovate or extend your home, you can refinance with another lender or source a different mortgage with your existing one.

Refinancing a home loan for debt consolidation

Many of us accumulate smaller debts like credit cards and car loans over a period of time. You might find it makes sound financial sense to use lower home loan rates to get rid of some of that costlier debt. Credit cards can be especially harsh when it comes to the cost of servicing debt – often having an interest rate in excess of 20%. Even personal loans can’t compete with home loan interest rates, so refinancing to consolidate debt is usually an excellent idea.

How do I compare home loan refinance options and rates?

Once you’ve decided to refinance, it’s essential you compare as many home loan options as you can.

You can use Savvy’s tables to quickly compare lender offers, fees, and rates. You’ll find two rates for each loan. One is the interest rate and the other is the

comparison rate, which includes any basic fees associated with the product. It’s a great way to quickly compare the merits and drawbacks of each lender and mortgage. Loan providers differ, so you’ll find various fees within relatively broad ranges:

Interest rate	Term
Application fee - $150 - $750	Most home loans come with a one-off establishment or setup fee.
Account fees - $5 - $20 per month	Remember that account fees can equal a lot over the course of a mortgage. Consider that a monthly $15 fee adds up to $5,400 over twenty-five years.
Discharge fee - $250 - $500	You’ll usually need to deal with this fee if you pay down early or refinance your home loan.
Break fee - varies	Break fees only apply to fixed-rate periods or home loans that date back to before 2011, when there was a rule change. The amount you pay gets based on everything from how much the lender is currently paying to borrow money wholesale (and that often changes daily) to how long you’ve got left on your fixed-rate period (the shorter, the better for you) and how much you initially borrowed plus the fixed rate itself.

A comparison rate is only a part of the equation when you’re trying to find the best home loan refinance deal:

Remember that a comparison rate can’t include things like discharge and break fees – just regular account and setup charges.

You’ll also need to consider any additional objectives you have – and how you can best achieve them. As we’ve learned, homebuyers refinance for different reasons – so look for products that give you the home loan features for the costs you need.

Calculate and save by comparing home loans

Compare hundreds of loan products for you to make the right choice and refinance with a better rate today. Use our comprehensive home loan calculator to workout your monthly repayments and find a better deal from over 25 premium home lenders.

Loan Amount

Loan Term

Lender	Product Name	Advertised Rate	Comparison Rate	Monthly Repayment
Savvy	Variable Refinance Loan	3.89% fixed	3.91%	$551.01
GreaterBank	Great Rate Variable Home	3.89% variable	3.89%	$551.01
Macquarie	Basic Variable Home Loan	3.89% variable	3.89%	$551.01
AMP	Essential Home Loan	3.89% variable	3.91%	$551.01
Bank of Australia	Premium Home Loan Fixed 3 Years	3.94% fixed - 3 yrs	4.63%	$551.68
IMB	Essentials Investment Loan	4.09% variable	4.09%	$553.71
CBA	Fixed Rate Home Loan 3 Years	4.24% fixed - 3 yrs	5.10%	$555.75
ANZ	ANZ Standard Variable Home Loan	4.35 - 4.50% fixed - 2 yrs	4.74 - 4.89%	$557.25
Westpac	SMSF Investment Property Loan Fixed 2 Years	4.99% fixed - 2 yrs	5.66%	$566.00

* The interest rate of 3.89% p.a. with a comparison rate of 3.91% p.a. is based on a loan amount of $150,000 and a term of 25 years. The comparison rate, monthly repayment and total cost applies only to the example given and may not include all fees and charges. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate. Establishment fees and monthly fees apply only to consumer loans. Commercial use loans may attract different fees.

Got question about home loan refinance?

Find all the answers to your most frequently asked home loan refinance questions right here

Will I need to pay Lender’s Mortgage Insurance again?

If you originally used a low deposit home loan, it’s likely you paid LMI. When you’re looking to refinance a home loan and you’ve built up more than 20% equity in the property since you originally borrowed, you won’t need to pay LMI again. Use more than 80% of the equity in your home when you refinance, and you will be required to pay LMI.

Will I need to have my home revalued when I refinance my mortgage?

Because the new lender will also use your property as security against your borrowing, they’ll ask for a fresh valuation. Chances are, the value of your home will have increased during the time you’ve owned it, so a valuation is not usually a cause for worry.

Is it worth checking my credit rating before I refinance my home loan?

Because the interest rate you’ll get offered is largely based on your borrower status, it’s well worth making sure you’re on top of everything – including your credit report. It’s also worth paying off any credit cards and loans you don’t need before you apply for home loan refinance.

How long will my home loan refinance take?

Switching home loans is a relatively straightforward affair. You apply, and when you’re approved, the new lender will liaise with your existing loan provider to transfer the debt and security as quickly as possible. How fast that happens will depend on your current and future home loan provider. Refinancing an existing home loan typically happens faster than when you need to find a house too.

Can I refinance my mortgage if I’m behind with payments?

Not every lender will consider an application if you’re behind with payments on your current loan, but Savvy partners with specialist lenders who consider non-standard applicants. If you’ve faced some hardship and you got your mortgage several years ago, it could be that getting a lower rate might make you more able to repay. As with all loan applications, lenders will make a decision based on the merits of your case.

Is it better to refinance my home loan before I retire?

If you’ve got income, lenders will consider your application after retirement, but you’ll likely pay a higher interest rate than while you’re still employed. If you’ve already retired, it’s important to weight things up based on how long your loan has left to run because fees and a slightly higher rate could outstrip any benefit from refinancing a couple of years from the end of the term, for example. If you’ve yet to leave the workforce, consider your options now and see how much you could save.

Why choose Savvy?

We are accredited with most reputable lenders in Australia giving you a fair choice to compare

We understand your needs

If your circumstances have changed or you’re simply looking for a better deal, Savvy can help

Renovations and investments

We can help you select the right solution when it comes to refinance for renovations and investment.

Get the Savvy difference

If your lender dodges calls and leaves emails gathering dust, apply and get the Savvy difference.

Latest property insights

Find out the latest property trends and get individual analysis by our experts.

Features, features, features

Offsets, redraws, lines of credit, debt consolidation – Savvy finds home loan products with a range of extras that help you and your family.

Competitive refinance rates

With over 25 lenders and banks clamouring for your business, Savvy sources the best refinancing products in Australia.

Your helpful guides to home loan refinancing

Want to know more about home loan refinancing? Need some help? Read our helpful guides to refinancing

How much can I save by refinancing?

A lot of Australian families are curious about refinancing their home loan. A fair proportion of those people often wonder – how much is this going to actually save me? Surely, we are only talking about a few dollars here and there. That couldn’t be further from the truth! According to the Australian Bureau of Statistics, the national average of savings as the result of refinancing is $259 per month. That’s $3,108 per year. On average, a homeowner will pay off a mortgage over 30 years. This represents an overall saving of $93,240 over the lifetime of that loan! By looking at more loans from more lenders, you could achieve even better savings than the average.

What you need to know about exit fees

The Federal Government banned banks and lenders from levying excessive exit fees in 2011. It also banned them from renaming exit fees as something else such as “account termination fees” or something similar. Though the days of four – even five! – figure exit fees are behind us, you should be aware of other fees that banks or lenders may charge when you refinance. Most lenders will charge a termination fee of some kind, although this will be modest. Some banks charge establishment fees, which can add to the cost of refinancing. To make sure your new home loan has the lowest fees possible, talk to a broker or consultant to find out more.

Refinancing – a path to property investment?

When thinking about refinancing your home loan, you may be considering buying another property at the same time. If your loan to value ratio (sometimes referred to as equity) in your home is reasonable, a bank or lender may extend your mortgage to cover an investment property. (Or they may ask you to pay for Lender’s Mortgage Insurance if your LVR is below 20%.) When you are looking at investment property loans, you should shop around for “investor friendly” mortgages, which include offset accounts or lines of credit for added flexibility. You should also consult a financial professional to help you with tax liabilities.

When is the best time to refinance?

There is no 100% “best” time to refinance, but there are some simple rules to follow to help get the most out of your refinancing. First off, you should not refinance too often, especially if you have low equity in your home. This means buying Lender’s Mortgage Insurance if your loan to value ratio is too low. You should wait at least 18 months before considering a refinance. Other good times to refinance are after rate changes, or every new financial year. This may not result in a full refinancing. It might be enough to prod your current lender into matching or bettering a competing deal.