Is refinancing still worth considering?
HOME LOANS · MARKET UPDATE
Is refinancing still worth considering?
With the cash rate on hold, many borrowers haven’t reviewed their home loan in a while. Here’s what to think about before you decide.
Loyalty tax is real: lenders often reserve their best rates for new customers. If you’ve been with the same lender for some time, you could be paying more than you need to.
The rate difference could be meaningful
According to MoneySmart, variable home loan rates can vary by more than 2% between lenders. Depending on your loan size, that gap translates to a real difference in what you’re paying every month. It’s worth knowing where your rate sits relative to the market.
Factor in fees before you switch
Refinancing isn’t free, so it’s important to weigh any upfront costs against the potential savings. Fees to be aware of include:
- Break fees — if you’re on a fixed-rate loan
- Discharge fees — charged by your current lender to close your loan
- Application fees — charged by the new lender
- Government Fees — depending on your state or territory
Check your equity position
Know how much equity you hold in your property before refinancing. If you have less than 20% equity, you may be required to pay Lenders Mortgage Insurance (LMI) again — even if you paid it on your original loan. LMI is generally not transferable between lenders.
Think carefully about the loan term
Resetting to a 30-year term can reduce your monthly repayments but means paying significantly more interest over time. Consider a loan term that aligns with what remains on your current loan, or discuss the trade-offs with your broker before deciding.
Make your features work harder
Features like an offset account or redraw facility let you keep extra funds reducing your loan balance while still keeping them accessible. If your current loan doesn’t include these, it may be worth exploring options that do.
A broker sees more of the market
Comparison websites can be a useful starting point but may show only sponsored or limited results. A mortgage broker takes the time to understand your full situation before comparing options across a wide range of lenders — including how any switching costs stack up against potential savings.
Not sure if refinancing makes sense for your situation? We offer a no-obligation home loan health check to help you understand your options.
General information only. Please consult your financial adviser for advice specific to your circumstances.