Home Loan Refinance

Let Savvy help you with your home loan refinance by comparing offers so you can find the lowest interest rate and most suitable loan available.

Last updated on May 30th, 2022 at 07:21 pm by Cate Cook

Home loan refinance

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.

 

 

Home Loans

So many reasons to refinance your home loan

Lowest interest rates

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.

Reduce your loan fees

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.

Use your existing home equity

If you already have equity in your home, you may be able to use it as security in place of a cash deposit to refinance your loan.

Choose the features you need

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.

Select your interest type

Choose between fixed, variable or split rate loans from a variety of lenders, and decide whether a principal and interest, or interest-only loan is right for you – the choice is yours.

Simple refinancing with quick processing

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.

Why start your home loan refinance journey with Savvy?

Why you might look to refinance your home loan

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Frequently asked home loan refinance questions

Should I refinance to add an offset account to my home loan?

If you don’t already have one, a mortgage offset account can be a great way for you to reduce the cost of your home loan. Every dollar deposited in your account (which is essentially a transaction account linked to your mortgage) reduces the interest payable on one dollar of your mortgage. For instance, a $30,000 deposit into an offset account would mean the interest on your $500,000 home loan would be calculated based on an outstanding principal of $470,000. This home loan repaid over 30 years at 3% p.a. interest with a $30,000 offset account balance would save you almost $41,000 and trim your loan term by 18 months.

When is a good time to refinance to a split home loan?

If interest rates look to be on the rise but you still want the freedom to pay down part of your home loan freely without any fees for additional instalments, a split home loan might be right for you. You can fix a larger portion of the loan, benefitting from lower interest, while still being able to make extra repayments on the variable part of your loan. If you want to calculate how much you could save by doing so, you can use Savvy’s split mortgage calculator.

Will I need to resubmit all my documents again when I refinance?

That depends on whether you choose to go with another lender or stick with your existing lender.  If you stay with your existing lender, little further documentation is likely to be required (although this depends on how much time has passed and whether your financial situation has changed substantially). However, if you’re applying with a new lender, it’ll be treated in the same way as any other new application, meaning you’ll have to resubmit all your documents.

Should I check my credit report before I refinance my home loan? 

Yes – it’s a very good idea to ensure your credit report is accurate, and to correct any mistakes you may find by contacting the credit agency who supplied your report.  It’s also important to ensure that all unnecessary debt and credit cards are paid off or cancelled before applying for a new loan.

How long will the home loan refinance process take?

If you stay with your existing bank or lender, home loan refinance offers can be approved as soon as the same day.  However, if you’re changing to another lender (or if you have a more complex financial situation, such as owning property trusts or multiple companies), you can expect the process to take anywhere from several days to several weeks.

Can I refinance my mortgage if I’m behind with my loan repayments?

This is a situation where you need to speak to your lender and explain that you’re suffering mortgage stress.  Your lender may be able to suggest an alternative loan structure which could assist you in your current position.  Don’t leave it until you’ve missed multiple repayments; talk to your lender as soon as possible.