What is refinancing?

Refinancing or re-mortgaging a home loan refers to switching from one mortgage to another, often with a different bank or mortgage lender.

Find and compare refinancing home loans

Sort By
Product
Advertised Rate
Comparison Rate*
Company
Monthly Repayment
Features
Real Time Rating™
Go to site

2.94%

Variable

2.87%

Athena Home Loans

$1,413

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.34

/ 5
View Now
More details

2.19%

Variable

2.23%

Reduce Home Loans

$1,299

Redraw facility
Offset Account
Borrow up to 70%
Extra Repayments
Interest Only
Owner Occupied

3.91

/ 5
View Now
More details

2.29%

Variable

2.32%

Homestar Finance

$1,314

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.91

/ 5
More details

2.09%

Fixed - 2 years

2.35%

Tic Toc

$1,285

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.48

/ 5
View Now
More details

2.39%

Variable

2.39%

Athena Home Loans

$1,329

Redraw facility
Offset Account
Borrow up to 60%
Extra Repayments
Interest Only
Owner Occupied

3.57

/ 5
View Now
More details

2.49%

Variable

2.43%

Athena Home Loans

$1,344

Redraw facility
Offset Account
Borrow up to 70%
Extra Repayments
Interest Only
Owner Occupied

3.35

/ 5
View Now
More details
Advertisement

Why should I refinance?

There are many different reasons to consider refinancing a home loan. Some of the most popular include:

  • To reduce your loan costs: Refinancing to a home loan with a lower interest rate may help make your home loan payments more affordable, and allow you to save money over the longer term. 
  • To enjoy more flexible features: Switching to a home loan that allows you to make extra repayments, or access redraw facilities or offset accounts may allow you to better manage your mortgage payments. This could help you to pay down your loan more quickly and save money over the longer term. 
  • To free up some equity: If you’ve paid off a chunk of your home loan, you may be able to use this equity to secure another loan, such as a line of credit. This could help you pay for renovations or other major projects. 
  • To consolidate debts: If you have outstanding personal loans or credit cards, you may be able to add these debts onto your mortgage to pay off over time. This can help you pay less interest in the short term, thanks to the generally lower interest rates of home loan, though paying these debts off over a longer term means you may pay more interest in total. 
  • To find a lender that treats you better: If you’re unhappy with your bank’s customer service, refinancing may let you switch to a lender that listens to you. As well as banks, there are a range of non-bank mortgage providers to choose from. This includes online-only lenders, which don’t have branches to visit, but can often offer lower interest rates. 
  • To take advantage of incentives: Some lenders offer special discounts and other benefits to new customers, from reduced interest rates to cashback deals. Refinancing to a new lender may let you enjoy these special benefits, though it’s important to compare the value they offer to the loan’s overall cost before making a decision.

How much does it cost to refinance?

Refinancing isn’t free, but the benefits of refinancing may help to make up for its costs.

When you refinance, you may have to pay the following:

  • Discharge fees (average $300): Covers the paperwork when you end a home loan, including when you switch to a new lender.
  • Upfront fees (average $570): Covers the admin cost of setting up your new home loan.
  • Valuation fee (varies): Covers the cost valuing the property as part of the mortgage application process.
  • Break fees (varies): If your current home loan is on a fixed interest rate, you may need to pay a fee to refinance from this arrangement.
  • Lender’s Mortgage Insurance (LMI) (varies): An insurance policy that covers the lender (not the borrower) against the risk that you’ll default on your mortgage repayments. Charged when your deposit and/or equity used to secure a loan is less than 20 per cent of the property’s value. The less security you can provide, the more the LMI may cost.

Before you refinance, consider working out the total cost of switching mortgages, and estimate how long it may take for the savings on your new loan to make up the difference.

TIP:

Some lenders may offer to cover your discharge fees and/or forfeit their upfront fees to earn your business. It could be worth negotiating your fees before signing a loan contract.

How long does it take to refinance?

The refinancing process typically takes between two and four weeks, depending on your situation and the lenders involved.

However, some lenders offer a Fast Track refinance option, which may allow you to switch loans in as little as three days.

Even though refinancing can require some of your time and effort, the potential benefits could make a significant difference over your remaining home loan term.

What do I need to refinance?

The exact paperwork you’ll need to refinance a home loan will depend on the lender, but some of the common requirements include: 

  • Past mortgage statements: To confirm your current interest rate, your equity, and how much is left on your mortgage
  • Employment details and payslips: To confirm your income and employment status
  • Identification details e.g. passport, driver’s licence etc.: To confirm your identity and residence
  • Details of any other assets (e.g. cars, boats, other valuables) or liabilities (e.g. personal loans, car loans, credit cards): To provide a clear picture of your financial status.
  • Bank statements: To confirm your income and regular living expenses

TIP:

When you tell your current lender you have found a new loan with a better rate and/or better fees, your current lender may try to persuade you to stay.

 

Before you start planning to refinance, you may want to speak to your current lender about their flexibility on rates or fees, and see if they’re willing to negotiate to keep your business.

What are the steps of refinancing?

  1. Define your refinance goal: Do you want to reduce your monthly repayments? Pay off your loan quicker? Get cash out of the property? Consolidate debts? 
  2. Find your current loan’s details: This includes your current interest rate, outstanding mortgage balance, and monthly repayment, as well as the current value of your property and the discharge fee on your current loan.
  3. Compare alternative home loans: Compare interest rates, fees, features and benefits, and consider which loan options may be able to help you achieve your goals. If you need help, you can use a comparison website, or contact a mortgage broker. 
  4. Work out your switch cost: Check what fees and charges you’ll need to pay to exit your current loan and switch to a new one. You could also try to find out if a new lender would be willing to cover your discharge fee and/or forfeit its upfront fee to earn your business.
  5. Calculate break-even point: Work out how much you could save per month by switching to a cheaper home loan, then work out how long it would take for these savings to make up the switch costs.
  6. Make your decision: Based on the information at hand, decide if you still want to switch lenders, and which mortgage you’d like to choose.
  7. Apply: Contact your new prospective lender and start the application process.
  8. Get your valuation: Most lenders require a valuation as part of the mortgage application process, including when you’re refinancing, to confirm how much money they can safely lend you. These valuations may be conducted online, based on information about the local area, property size and condition, while sometimes a valuer will come out to physically inspect the property.
  9. Receive your approval or rejection from the lender.
  10. Transfer and settle your loan.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.

Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002

What is 'principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.