Switching home loan lenders



Mar 22, 2012( 3 min read )

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Considering refinancing your home loan? Then you’ve come to the right place, because at RateCity you can search, compare and apply for home loans to find the best one for you. But before you consider switching lenders, there are a few things you’ll need to know. We’ve done the leg work for you by listing the tips we think will be most useful.


You’ll need to check that you have sufficient equity in your home to refinance. That’s because few home loan lenders will be willing to lend anyone 100 percent of the value of the property. Most lenders will require a deposit of some kind – five percent equity (or deposit for first time buyers) is often the requirement to be eligible for refinancing. If you have less than 20 percent equity, many lenders may require you to take out Lenders Mortgage Insurance (LMI).

What is LMI?

LMI is an insurance policy taken out to protect, not you, but the lender should you default on the home loan. While the bank takes out the policy, you pay the premium. In one of the remaining barriers to real loan portability, lenders mortgage insurance isn’t portable. That means that if you take out a new loan (even if it’s for the same property) and you have less than 20 percent equity, you may need to pay an LMI cost again. What’s worse, is that not only will you be up for another bill, you’re unlikely to get the most attractive refinancing offers because your new low level of equity by definition makes the deal riskier for a lender than if you own more of your home.

The time frame for switching

Switching a home loan isn’t trivial – it’s unlikely that you’ll knock it over in a day. But it is easier and cheaper than most players would have you believe. It’s likely to take you about a month from comparison to new loan. The costs will range from around $1000 to $2000, depending on the lender – but these costs are trending down and most borrowers typically recoup switch costs within the first year of refinancing.

Research and discussions

Finally, comparing home loans and shopping around doesn’t just have to be a way to get ready to move to a new lender. It’s also a way of negotiating with your current lender – they are more likely to enter a discussion about rates or fees with a customer who has a done their homework and seems serious about taking their business elsewhere. If they still won’t budge on rates, then you’ve already done the hard work so why not take advantage of a better home loan deal?

To compare your current home loan to the competitors visit the RateCity home loan comparison page. Use the mortgage repayment calculator to balance the figures and see if making the switch will be financially rewarding. 



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