How long should you wait before refinancing your existing home loan?

Last updated on November 25th, 2021
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Looking for deals every year

The home loan market changes a lot in twelve months. The loan you took out a year ago may not look as attractive in the present day. Using a broker or looking at a few websites and comparing your home loan against other mortgage products every year gives you a good baseline to follow when you do decide to refinance your home loan. If you have greater equity in your home, you could be eligible for offset accounts, lower interest rates (significant enough to make a difference – not full percentage points!) and lines of credit.

Looking for deals after a rate change

Looking for new and better home loan deals after a rate change is also beneficial, as it prompts lenders into working harder to keep your business. If you find a better overall deal and your bank can’t match it, it’s easier than ever to park your mortgage elsewhere. Banks and lenders know it’s a competitive market for home loans, and should be more flexible when competition heats up. If your lender doesn’t pass on the full rate cut, or increases rates beyond the RBA’s official rise, this is definitely a prompt to search for a new home loan.

Refinancing – costs vs. benefits vs. time

Is it worth refinancing all the time? If you do not own sufficient equity in your home, it may not be worth it. You may have to buy Lender’s Mortgage Insurance that can prove costly. Also, you may have to provide all the documentation and proof of income again, just as you did when you applied the first time. (Want to save time? A mortgage broker can handle much of this for you.)

If you scour the market and can only find loans with percentages of percentages lower than what you’re on, the benefit may not be worth the time – especially if you have to pay extra fees. A $400,000 loan at 4.1% p.a means repayments of $1,931 per month over 30 years. A dip of just 0.5% can save you $114 per month, or $1,368 per year. That’s almost one month’s saving over the old rate. It’s true: refinancing can save you money!

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t 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.

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