Mark BristowMark BristowMay 04, 2017(3 min read)

Refinancing is when you change your home loan from one loan to another – provided either by the same lender or by switching to a different lender. When you refinance, you are technically paying out your old home loan early and starting up a new one.

Switching lenders is often much simpler than many Australians believe, and can make a significant difference to the finances and lifestyles of many home owners.

To help make comparing different home loan offers simpler, RateCity will compare your financial profile to the offers in the Switch & Save Sale, and filter out the loans that aren’t suitable for you, e.g. investor loans if you’re an owner-occupier. We’ll also calculate the potential savings of each loan compared to your current mortgage, and summarise the benefits offered by each lender so you can make a more informed decision.

Here’s how the refinancing process works at the Switch & Save Sale:

  • Proceed through the Switch & Save Sale wizard, and enter your home loan details and contact details
  • Select a loan out of the ones on sale
  • The lender will contact you to help you to answer any questions and help with the application process
  • Complete your application within 30 days of the event finishing if you decide to proceed
  • Have your property valued by the lender
  • Await approval
  • Settlement

Depending on your lender, this process could take as little as 3 days or as long as 30 days.

If you choose to proceed with an application to refinance, this usually requires some paperwork, such as confirmation of your identity, your income, your residence and any other debts. Once you’ve selected one or more home loan offers from the options at the Switch & Save Sale, the lender(s) will soon be in touch to guide you through their application process and provide assistance if required.

There are several potential benefits to refinancing your home loan, which won’t always apply to every borrower. These benefits include:

  1. Saving  money by moving to a lower interest rate – Moving to a lower interest rate can potentially save you thousands. Of course, you need to make sure your new loan has all the functions you need, and that you are happy with the service your new lender provides.
  2. Paying off your home loan faster – If you refinance onto a lower interest rate but keep making the same monthly repayments, you can pay off your loan faster, and save additional money by doing so. The longer it takes you to pay off your loan, the more you will pay your lender in interest.
  3. Find a home loan that suits your changing needs – A typical home loan lasts for 30 years, and a lot can happen over that time. When you switch to a new lender, it’s worth considering whether these features are important to you:
    • Extra repayments
    • Redraw facility
    • Offset Account
    • Interest only payments
    • Call centre/branch support

Related FAQ's

How does it work?

For 40 hours – from 6am, 8 May to 10pm, 9 May (AEST) – a selection of home loan products from eight participating lenders will be available, with competitive low rates in addition to rate reductions, fee waivers and cashback offers.

Answer a few quick questions, such as your current interest rate and the size of your monthly repayments, and in under 60 seconds you’ll have access to some great home loan offers.

Once you’ve selected an offer that interests you, you can contact the lender with just a click. The lender soon be in touch to guide you through the refinancing process.

At this point, there’s still no obligation to switch – you’ve got 30 days to think it over and submit your application to the lender.

How have you calculated the savings?

The calculations are a model only, and not a prediction. The results are only estimates, whereas the actual amounts may be higher or lower. We cannot predict things that will affect these results such as changes in interest rates and their differentials. 

We used your data and compared against the loans that we have on sale.

To do your own independent calculations we recommend using the ASIC mortgage switching calculator. This calculator is provided by the Australian Government.

Why do I need to enter my contact details?

We will need to pass your details on to the lender so they can contact you about submitting your application. We may also use your information to keep you up to date on future RateCity initiatives and news, if you select this option. You can opt out at any time.

What are the costs involved in refinancing?

Switching lenders usually includes some costs, such as a discharge fee from your existing lender and upfront fees from your new lender, including application fees, settlement fees, legal fees and valuation fees.

When assessing a potential loan, it is good to work out your break-even point – i.e. the time it will take to recover the costs of switching.

Your new lender will disclose all fees and costs to switch to them.

Are there any risks with changing to a smaller lender?

A smaller lender is almost any institution outside of the big four banks (ANZ, CBA, NAB and Westpac). These include credit unions and building societies and ‘non-bank’ lenders. These lenders must follow the National Consumer Credit Protection Act 2009, which ensures the lender properly assesses whether a potential customer can realistically repay a loan, and that a specific standard if information is made accessible to potential customers.

They are regulated by the same bodies as the big four banks and many of them have been around for a very long time. The National Consumer Credit Protection Act 2009, and the regulatory framework under which financial institutions work are all in place to minimise any risk to consumers.

All participating lenders in the Sale have been in business for over 5 years, and actively lending to thousands of Australian home owners.

Do I need to have a good credit score to refinance?

RateCity cannot determine this, as we are not privy to the different credit policies of each lender. Please seek advice or speak to a lender directly.

How do I determine the value of my property?

Here we are asking you to estimate only. It’s often hard to get an accurate estimate of your property value. Some real estate websites such as Domain, Realestate.com.au and Onthehouse will give you an estimate, however be aware that a bank valuer might assume a lower estimate, so it can be a good idea to make your estimate slightly lower.

If you do apply for refinance, the lender might send a valuer out to your home, so it is worth being prudent.

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