Switching Home Loans

Switching home loans could save thousands, give you access to equity in your home, consolidate debt or upgrade loan features to help you meet your financial goals.

Switching Home Loans

When was the last time you did a health-check on your mortgage? The market is super competitive and by switching home loan options you could get a better deal.

Switching home loans, also known as refinancing, means you replace your existing mortgage with a new mortgage.

By doing so you may access a lower interest rate, equity in your home or other benefits your current loan doesn’t offer.

Refinancing usually means changing lenders but it can be done with your existing home loan provider.

What are the benefits of changing home loans?

There are a few reasons you might consider switching home loan options;

To get a better interest rate

Switching to a lower rate could save thousands over the lifetime of your home loan and lower your repayments.

For example, on a $500,000 loan at 3.5% interest over 25 years, your monthly repayment is $2503. 

By switching to an interest rate of 2.5%, your payment decreases to $2243 per month. A saving of $260 per month.

Swap from a variable to fixed-rate mortgage

Changing to a fixed-rate mortgage will lock in the same monthly repayments which can make managing your monthly budget easier.

Access equity in your property

Equity is the difference between what you owe on your mortgage and the value of your home.

Say you currently have a $300,000 mortgage balance and your home is worth $500,000.

Most lenders will let you borrow up to 80% of the property value. This means you may be able to refinance your loan for up to $400,000.

The difference between the new loan amount and the original loan balance is what you’d receive in cash. In this example, it would be $100,000.

You can use the extra money for things like home renovations or paying off debt.

Consolidate debts

Combining your outstanding debts (personal loans, credit cards, etc) into one loan can simplify repayments.

You might also save on interest over the long run.

Get extra features

Switching home loans options may give you access to extra features like redraw facilities or flexible payment options.

How to switch your home loan

Below are the basic steps involved in refinancing your home loan

Step 1: Review your current home loan

Check the interest rate, fees, and features of your current loan. Also, understand why you want to refinance. Do you want to lower your monthly repayments, access equity to free up cash, or consolidate debts?

Step 2: Compare home loans

The next step is to shop around and compare loan products.  Here are a few things to think about;

  • Interest rate

Always use the advertised ‘comparison rate’ when comparing.

  • Type of home loan

Fixed-rate or variable-rate loan.

  • Loan duration

This will affect the size of your monthly repayments and total interest you’ll pay.

Switching home loans for a lower interest rate might sound like a good idea. However, even a lower interest rate over a longer loan term may have you paying more in the long run. 

Use our home loan repayments calculator to compare the total interest you’ll pay over different terms.

  • Fees

The costs of both closing your existing loan and establishing a new one. You’ll find a run down of these further along.

  • Flexibility and features

For example, redraw facilities, cash back offers, flexible repayment frequency, extra repayments, and loan portability.

Use our easy home loan comparison tool to research trusted Australian lenders for switching home loan options.

Talk to your current lender about refinancing with them.  They may be able to offer a lower rate or meet your other requirements to keep your business. Sticking with the same lender may save you some fees too. 

Step 3: Calculate the costs involved

Always crunch the numbers to see if the cost of changing lenders will exceed the potential savings you can make.

Step 4: Apply for your new home loan

Found the loan you want? Time to submit all the required documentation.

This will include identification, current loan details, financial information (income, etc) and details of your property.

Your prospective new lender will then do a property valuation on your home. Their assessment of the property’s worth will determine how much they will lend you.

Step 5: Exit your current loan

Your new lender will contact your old lender to exit your current home loan. They’ll exchange all required documents and make the title transfer.

Step 6: Settlement

Lastly, your new lender receives the title deed to your home and  your old loan is paid out. You’ve refinanced your home!

Got a question about switching home loans?

What are the costs associated with switching home loans?

Refinancing can be costly. Fees to expect when switching home loans may include;

  • Switching fee
  • Termination fee
  • Early discharge / break fee
  • Application fee
  • Lenders Mortgage Insurance (LMI)


Contact your current and future lenders to find out how much each of these fees will cost you.

How long does it take to refinance a home loan?

Refinancing can take anywhere from a couple of weeks to over a month. It depends on the loan complexity and whether you are switching lenders.

How does refinancing lower my payments?

Refinancing can help reduce payments in several ways;

●        By locking in a lower interest rate

●        Adjusting repayment frequency

●        Changing the loan term

●        Accessing flexible loan repayment features

What does “cash out” refinance mean?

Your new home loan is larger than your previous mortgage because of the property’s current equity. You receive the difference in a cash lump sum payment.

How does debt consolidation work?

The outstanding balances of smaller debts, for example, credit cards, are rolled into your mortgage. This can simplify repayments and save money on interest.

When is a good time to refinance your mortgage?

If the market is offering lower interest rates than your current mortgage, it could be time to consider refinancing.

Is refinancing a bad idea?

You need to go over the numbers and time line projections in detail. People run into problems  switching home loans options when they don’t

They wind up paying more over time because of longer loan terms, fees and closing costs.