When should you consider refinancing your home loan?

Start by reviewing your current loan

Before comparing alternatives, understand what you already have.

Look at:

• your current interest rate;
• loan balance;
• remaining loan term;
• regular repayment;
• annual or monthly fees;
• offset or redraw features;
• whether any portion is fixed;
• any discharge or break costs.

This gives you a proper starting point for comparison.

A lower interest rate can matter

A lower rate may reduce your repayments and the amount of interest paid over time.

The benefit depends on:

• the size of the loan;
• the rate difference;
• the remaining term;
• refinance costs;
• whether the new loan term is extended.

Even a modest rate difference can become meaningful on a larger balance, but the numbers should be considered as a whole.

Consider the cost of changing

Refinancing can involve costs such as:

• discharge fees;
• application or establishment fees;
• valuation costs;
• government registration charges;
• possible fixed-rate break costs.

These costs can reduce the initial benefit of refinancing.

A useful comparison is the break-even period: how long it may take for the repayment difference to recover the cost of changing loans. Our Refinance Savings Calculator can help you estimate that.

Be careful about extending the loan term

One of the easiest ways to reduce a monthly repayment is to extend the loan term.

That can improve short-term cashflow, but it may also mean paying interest for longer.

When comparing a refinance, consider both:

• the new repayment; and
• the total remaining cost over the proposed term.

Your needs may have changed

Refinancing is not always about the lowest rate.

You may want to review your loan because:

• you want an offset account;
• you need more flexible repayment features;
• you want to restructure debt;
• you are planning another property purchase;
• your income or circumstances have changed;
• your current lender or product no longer suits your needs.

Equity and property value can affect your options

The amount of equity in your property can influence which lenders and products may be available.

If your loan is a high proportion of the property value, changing lenders can involve additional considerations and costs.