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New year, new home loan: How to refinance your mortgage in 2022

New year, new home loan: How to refinance your mortgage in 2022

The new year is a great time to reset and look at what you want to achieve in the coming months. For many Australians, refinancing their mortgage may be at the top of the list.

Whether you’ve spent the last year listening to experts suggest interest rates may rise, or the financial pressures of the pandemic have you looking for ways to reduce your household expenses, 2022 may be the year to refinance.

Before you go ahead, it is worthwhile to see what offers and rates may be available to you. Understanding what current interest rates and loan features are on offer can help you make the best decision for your circumstances. Our loan comparison table can help you research and understand the current mortgage market.

Company
Product

Green Home Loan

Real Time Rating™

4.61

/ 5

Winner of Best Green Home Loan, RateCity Gold Awards 2022

Interest Rate

1.88

% p.a

Variable

Comparison Rate*

2.30

% p.a

Repayment

$1,254

monthly

Real Time Rating™

4.61

/ 5
Go to site

Winner of Best Green Home Loan, RateCity Gold Awards 2022

Company
Product

Fixed Rate Home Loan (with Advantage Package)

Real Time Rating™

1.86

/ 5
Interest Rate

5.19

% p.a

Fixed - 5 years

Comparison Rate*

4.76

% p.a

Repayment

$1,298

monthly

Real Time Rating™

1.86

/ 5
Go to site

Cashback

Receive $4000 in cashback when you refinance
Company
Product

Variable Home Loan

Real Time Rating™

4.07

/ 5
Interest Rate

2.09

% p.a

Variable

Comparison Rate*

1.99

% p.a

Repayment

$1,285

monthly

Real Time Rating™

4.07

/ 5
Go to site

special

Receive $5,000 AUD cashback when you refinance your existing home loan ~ Ends in about 1 month
Company
Product

Smart Booster Home Loan Discounted Variable - 1yr

Real Time Rating™

1.76

/ 5
Interest Rate

1.99

% p.a

Intro 12 months

Comparison Rate*

3.75

% p.a

Repayment

$1,931

monthly

Real Time Rating™

1.76

/ 5
Go to site

special

1.99% variable rate for 12 months then 2.48% variable rate
Company
Product

Owner Occupier Accelerates - Celebrate (Principal and Interest)

Real Time Rating™

3.93

/ 5
Interest Rate

2.14

% p.a

Variable

Comparison Rate*

2.14

% p.a

Repayment

$1,292

monthly

Real Time Rating™

3.93

/ 5
Go to site
Company
Product

Smart Booster Investor Bundle Discount Variable - 1 Year (Principal and Interest)

Real Time Rating™

1.76

/ 5
Interest Rate

1.99

% p.a

Intro 12 months

Comparison Rate*

2.96

% p.a

Repayment

$1,761

monthly

Real Time Rating™

1.76

/ 5
Go to site
Company
Product

5 year Fixed Rate Home Loan

Real Time Rating™

1.50

/ 5
Interest Rate

4.64

% p.a

Fixed - 5 years

Comparison Rate*

4.73

% p.a

Repayment

$1,691

monthly

Real Time Rating™

1.50

/ 5
Go to site
Company
Product

Owner Occupier Accelerates - Liberate (Principal and Interest)

Real Time Rating™

3.67

/ 5
Interest Rate

2.24

% p.a

Variable

Comparison Rate*

2.18

% p.a

Repayment

$1,307

monthly

Real Time Rating™

3.67

/ 5
Go to site
Company
Product

Investor Accelerates - Celebrate (Principal and Interest)

Real Time Rating™

3.18

/ 5
Interest Rate

2.44

% p.a

Variable

Comparison Rate*

2.44

% p.a

Repayment

$1,337

monthly

Real Time Rating™

3.18

/ 5
Go to site
Company
Product

Low Rate Home Loan - Prime (Owner Occupied) (Principal and Interest)

Real Time Rating™

4.54

/ 5

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Interest Rate

1.89

% p.a

Variable

Comparison Rate*

1.89

% p.a

Repayment

$1,256

monthly

Real Time Rating™

4.54

/ 5
Go to site

Winner of Best Refinance Home Loan, RateCity Gold Awards 2022

Steps to refinancing your home loan in 2022

1.Identify your goals

The most common reasons homeowners look to refinance generally includes:

  • To nab a lower interest rate
  • To pay lower fees
  • To free up equity in the property
  • To consolidate debt
  • To add features to the home loan (offset account, redraw facility and more)

2.Research

For refinancing, take time to consider which new home loan and new lender may best suit your financial situation and line up with your refinancing goals. Use comparison tools, such as comparison tables and home loan calculators, to make a short list of new loan options. Filter your options via your specific needs and compare home loans side by side via interest rates, fees, and potential repayments.

3.Eligibility criteria

Just like when you applied for your current home loan, you will need to meet specific eligibility criteria, such as a loan-to-value ratio requirement, with a new lender to gain approval for your new mortgage.

Take some time to look at the requirements set by the new lender and assess your current financial situation, including your credit score, any existing debts, and your income levels. If there are areas you need to work on, such as paying off a car loan, consider doing this first to boost your chances of loan approval.

4.Documentation

Now you know your ideal new lender and you’re all set to meet the lending criteria of the new mortgage, it’s time to get your paperwork ready. Gather the personal identification and income verification documentation you may need ahead of time to make the application process as painless as possible.

5.Application

Hop online or consider going in branch to make your application to refinance to a new home loan lender. At this stage, you may need to pay an application fee. If you’ve followed the first four steps, this should take no time at all.

6.Valuation

In some instances, your new home loan lender may re-value your property before they can approve your refinancing application. This typically will take around 2-3 business days following the application submission.

7.Refinancing approval

A new home loan lender may take anywhere up to 2 weeks and beyond to approve your refinancing application. Once your application has been approved, the new lender will begin the transferral process with your existing lender.

8.Settlement

Congratulations, your loan has been approved. Now your old home loan lender will transfer the property title and mortgage debt to your new lender, which may take a number of weeks to finalise.

The costs of switching your home loan

Keep in mind that refinancing a mortgage can cost you in more ways than just money. It’s important to be aware of all the costs associated with refinancing before you take the plunge.

  • Switching fees – This can include upfront fees with the new lender, such as application fees and establishment fees. If you’re refinancing from a fixed rate home loan, you may need to pay an early exit fee/discharge fee.
  • Loan term extensions – Another trap some homeowners can fall into is refinancing and extending their home loan term. For example, if you’re five years into a 30-year mortgage, and refinancing to a new 30-year mortgage, you’ve extended your original loan term by another five years. This could cost your thousands of dollars in additional interest charges.
  • Time and effort – RateCity data found that 40% of refinancers see that the time and effort associated with refinancing is one of the biggest barriers to the process. It’s worth being realistic that switching your home loan lender will involve some time in terms of research and waiting for valuations, as well as effort in terms of organising your paperwork, or even boosting your credit score before application.

While it is crucial you understand some of the traps associated with refinancing, it’s worth keeping in mind that the potential savings of time and money generally outweigh these costs.

Is 2022 the right time to refinance?

While the Reserve Bank of Australia (RBA) has kept the cash rate on hold at a record low of 0.10% since November last year, that hasn’t stopped interest rates from having a rollercoaster of a year.

In the last two months alone, ANZ, NAB and CommBank have hiked their fixed rates three times, while Westpac has done so four times, seeing the end of the rock-bottom, below-2% fixed rate era. This may be due to some financial experts tipping that the RBA cash rate may rise as early as 2022.

Meanwhile, the number of variable interest rates below 2% has grown, with 86% of the RateCity database cutting at least one variable rate in 2021.

Arguably the most popular reason to refinance a mortgage is to switch to a lower rate and/or lower fee lender. And for many mortgage holders, locking in the lowest rate possible is the goal. But as you can see, it’s seemingly impossible to predict if, and when, lenders may move interest rates out-of-cycle with the RBA.

RateCity research director, Sally Tindall, recently said: “Fixed rates might be on the rise, but banks have slashed their lowest variable rates this year in a bid to win new customers.”

“Most banks failed to pass on the last two RBA cuts in 2020 so variable rates have had room to move. Competition in the marketplace has brought these rates down to where they should be,” Ms Tindall said.

“However, these ultra-low variable rate cuts are primarily for new customers…By this time next year, there could be no fixed rates under 2 per cent,” she said.

Ultimately, the decision to refinance is highly personal and depends on your financial situation and budget. But it’s worth keeping in mind how the cash rate may move in the future, particularly if you want to lock in a lower interest rate.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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