There’s never been a better time to think about refinancing your home loan, with interest rates now on the rise and many online lenders making the home loan market highly competitive. Whatever your reason for wanting to switch to another loan there’s plenty of opportunities to save money, both on fees and interest payments.
Whether you’re wanting to switch loans to fix your interest rate, change the type of loan you have or even finance renovations or consolidate debt, Savvy can help you compare loans which fit your criteria until you find one that’s a perfect fit for you family’s needs. Start comparing your options today.
So many reasons to refinance your home loan
Want the lowest interest rate and extra features? Compare a range of different home loans with Savvy to find one that's a perfect fit for your needs.
No-fee and low-fee home loans are now available, so you can reduce the charges you pay on your loan and potentially save thousands over the years.
With such a wide range of loans to choose from, you can choose a loan with all the features you need to save on interest over the life of your loan.
We help you refinance by providing all the comparison information you need in one handy location. Many lenders offer rapid loan processing to get your refinancing completed quickly.
Your home loan options
Making your first big step towards buying a home? It's crucial to be across your mortgage options as a first homebuyer.
Opting for a variable interest rate on your home loan means it'll fluctuate as the market moves throughout your repayment term.
On the other hand, fixing your rate locks it in for a pre-defined period. This can bring with it greater certainty around your budget.
It's important not to set and forget when it comes to your home loan. If you find a more competitive offer, it may be worth refinancing.
If you're looking to build a new house, construction loans are specifically designed to cater to the different needs associated with doing so.
A guarantor essentially acts as a safety net for your lender, as they sign onto your loan to agree to pay it off should you become unable to do so.
Purchasing a property as an investment brings with it different specifications from a lender. It's crucial to know what your options are.
Businesses big or small may wish to purchase a property for commercial purposes, which are also different from a standard loan.
Your home loan may give you an interest-only option, which allows you to exclusively pay interest on your loan for a set period.
Just because your finances may be slightly more complicated as a self-employed individual doesn't mean you can't take out a home loan.
Some lenders may allow you to apply for a home loan with alternative documents, such as tax returns, BAS and ABN registration.
Why compare home loans with Savvy?
Why you might look to refinance your home loan
Get a better interest rate
If it’s been a few years since you looked at your home loan, you may be shocked at how much interest rates have changed. Refinancing to take advantage of lower interest rates can save you thousands.
For example, on a $500,000 principal and interest (P&I) loan taken over 30 years paid monthly, the difference between sticking with a 3.5% p.a. rate and refinancing to a 2.9% p.a. rate after three years is just under $100,000 in interest alone.
Compare loans to find the best home loan refinance
What is home loan refinancing and how does it work?
A home loan refinance is when you take out a new home loan to replace the repayments of your existing agreement. Essentially, this involves applying (and getting approved) for a new home loan, either with the same lender or a new one, and using that loan to pay off your outstanding debt. This means your repayments from that point until the end of your term will be taken up by the new mortgage. This may be for a variety of reasons, ranging from freeing up equity in your property to simply locking in a lower interest rate.
However, it’s important to note that, under certain circumstances, this could cost you a significant amount in fees. This is primarily the case for fixed rate home loans which, when broken prior to the conclusion of the agreement, could attract charges of up to thousands of dollars. On top of this, you may have to pay a mortgage discharge fee to cover the administrative cost of closing your former loan account, often amounting to a fee of between $300 and $500. It’s crucial to compare your various home loan options closely before committing to a switch, as you should only do so when it brings a significant benefit to you.
How can I refinance my home loan?
The process of refinancing your home loan isn’t dissimilar from what you may have experienced when applying for your first home loan. However, it’s important to be familiar with the process so you won’t be hit with any surprises along the way and potentially avoid delays. The steps to follow in this process are:
- Compare your options with Savvy: before starting your application, you should carefully survey the current mortgage landscape to see which home loan offers are best for you. This may be those which offer lower rates and fees, greater flexibility in terms of their features or anything else. You should always make sure the new loan will help you save money, so run some calculations to see what the benefit of doing so would be.
- Complete your home loan application: once you’ve decided on which lender and loan are right for you, you can get started with your application. This can be done either online, in branch or over the phone in most cases and will likely take a while to complete. The level of detail required on home loan applications is greater than what you might need on smaller finance types like personal or car loans.
- Have your property re-valued: your lender may request another valuation of your property before greenlighting your application, as they’ll want to be certain the house is still in good enough condition to cover the cost of your outstanding loan debt. This is especially the case for those who are refinancing ten years or more after buying their house, as plenty can happen in the intervening years.
- Receive loan approval: if your lender is satisfied with all your documentation, the value of your home and your credit history, they’ll offer you loan approval. This will involve filling out the same forms you did upon your initial mortgage settlement to confirm the new agreement. There may be less involved at this step if you refinance internally with the same lender.
- Settle your loan and pay out your old mortgage: once everything is signed off on by you and your lender, your previous loan will be paid out either by you or your new lender. After this has been done, you’ll have been released from your old mortgage and no longer required to pay interest on it, regardless of how long your previous lender takes to formally close the loan agreement. You can now start paying off your mortgage with your new lender and your refinance is complete.
How much can I save by refinancing? Is it worth the effort?
Yes, it’s worth looking at refinancing – and doing so could save you thousands of dollars. The latest figures from the Australian Bureau of Statistics (March 2022) showed the average Aussie refinanced a loan amount of $470,334.
Using Savvy’s mortgage switching calculator, you can see that if you switched a loan of this size, taken out over 25 years, from an interest rate of 4% p.a. to a lower one of 3.25% p.a., you could save $54,982 over the life of the loan. This is assuming it costs you $1,000 in switching fees and a mortgage registration change costing $500. Even with such costs, that’s a saving worth chasing.
However, there’s even better news for refinancers, as there are plenty of cashback offers available (up to $6,000) to encourage borrowers to switch lenders. These offers come in a highly competitive home loan market where lenders are vying for your refinancing business.
Will I have to pay extra fees for refinancing my mortgage?
Most likely yes – because refinancing involves wrapping up your old mortgage in the same way you would if you completed its payments to term, there are some administrative costs which can apply to your refinance. These include:
- Early repayment fee: this will only apply if your previous loan was a fixed rate mortgage, as these come with charges for breaking their terms. This will be based upon how long is left to run on your fixed term, your interest rate and the size of your loan, but could amount to thousands of dollars.
- Discharge fee: lenders often charge this to cover the cost of closing your loan account. It’s a relatively insignificant charge compared to other potential loan fees, but it could set you back between $100 and $400.
- Switching fee: if you’re refinancing internally, lenders may charge a fee for you to move from one mortgage to another. This will typically cost between $200 and $500 but some lenders will waive this charge altogether.
On top of these costs, you’ll also have to consider the fees associated with opening a new home loan account, which can include:
- Application/establishment fee: this can cost between $150 and $700 and covers the administrative costs associated with opening your loan account. However, many lenders will waive this fee as part of the agreement.
- Property valuation fee: lenders will want to make sure your property is still at the value required and in good enough condition to be sold (should it need to be). This revaluation can cost between $100 and $300.
- Settlement fee: this is a fee paid to the Lands Titles Office in your state and will cost between $100 and $200 depending on where you live in Australia.
How does my deposit work when refinancing my home loan?
While a cash deposit is required on your initial home loan (unless you applied with a guarantor who secured the agreement with equity in their property), this isn’t typically the case with a refinance. Over the time spent paying off your mortgage, you’ll have built equity in your property, which will also be impacted by any increase in its value over your repayment term. This equity will serve as the 20% deposit required for your new home loan.
However, there are situations where you may have taken out your home loan initially with a smaller deposit. This may have been the case through a guarantor, government grant such as the First Home Loan Deposit Scheme (FHLDS) or New Home Guarantee or simply by paying Lenders Mortgage Insurance (LMI). If you haven’t built up enough equity in your property since the point of purchase to cover a 20% deposit, you’ll be required to pay LMI again if you have no guarantor attached or other equity to draw upon.