Refinancing your home loan: when switching lenders is worth it
The cheapest refinance is often the one where you never leave. Here is how to work out whether to switch, reprice or stay put.
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Lenders compete hard for new customers and rely on existing ones not checking. For landlords especially, a loan that has not been reviewed in two or three years is one of the easiest places to find money.
Step 1: Know your numbers
Find your current rate, loan balance, fixed or variable status, fixed expiry date and any features you pay for. Compare the rate with what the market is offering new customers with a similar loan size and loan-to-value ratio.
Step 2: Ask for a reprice
Call your lender’s retention team, or have your broker do it, with a specific competing rate. Lenders often reduce the rate to keep you. If they do, you avoid all the costs below.
Step 3: Count the costs of moving
- Discharge fee from your current lender
- Application, settlement and valuation fees at the new lender (often waived)
- Break costs if you are on a fixed rate — these can be significant
- Lenders mortgage insurance if the new loan is above 80% of the property’s value
- Government registration fees for the mortgage discharge and new mortgage
Weigh those against the interest saving over the period you expect to hold the loan. Our repayment calculator shows the difference a rate change makes.
Step 4: Use the refinance to fix structure
A refinance is an opportunity to separate investment debt from personal debt, add an offset account, split fixed and variable portions, or consolidate expensive personal debt. For business owners, it is also a chance to review security across the group.
What we often find
In landlord loan reviews, the rate is usually only half the saving. The other half is structure — personal spending mixed into investment loans, offset accounts sitting against the wrong loan, or properties cross-securitised in a way that makes selling one harder than it needs to be.
When not to refinance
If your fixed rate expires soon, wait. If your income has fallen or your circumstances have changed, a new lender may assess you more strictly than the one you already have.
Common questions
At least every two years, and whenever a fixed rate is due to expire or your circumstances change.
Sometimes, but compare the rate over the life of the loan. A slightly higher rate can cost more than the cashback within a few years.
A credit enquiry is recorded, but one well-planned application rarely matters. Multiple applications in a short period can.
Sources
- Moneysmart (ASIC) — switching home loans
- Hedley Partners / LMG Broker Services Credit Guide
General information
This article is general information only. It is not credit assistance, a credit product recommendation or an offer of finance, and it does not take into account your objectives, financial situation or needs. Any application is subject to the lender’s assessment and criteria.
Full licensing, remuneration and complaints information is set out under Licensing & disclosures.
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