Refinancing Your Home Loan
How refinancing actually works, what it costs, how much you could save, and the traps to avoid, explained simply by an Adelaide mortgage broker.
Refinancing replaces your current home loan with a new one, ideally on better terms. People do it to cut their rate, lower repayments, access equity, consolidate debt, or move to a loan with features like an offset account. The value comes from comparing the whole market rather than just your own lender.
How much could refinancing save you?
The saving depends on the gap between your current rate and what you could move to, applied to your loan size and remaining term. Even a small rate reduction on a large balance adds up over time. The honest answer is that it is worth running your actual numbers rather than relying on a generic figure.
The traps worth knowing before you start
Three things catch people out: lenders mortgage insurance if you are still above 80 percent of your property value, break costs if you exit a fixed loan early, and chasing a big cashback attached to a higher rate. Knowing your loan to value ratio and your fixed term before you start avoids most of the surprises.
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Refinancing: common questions
What is refinancing and how does it work?
Refinancing means replacing your existing home loan with a new one, either with your current lender or a different one. The new loan pays out the old one, ideally on better terms such as a lower rate or different features.
Why do people refinance their home loan?
The most common reasons are to get a lower interest rate, reduce repayments, access equity, consolidate debt, or move to a loan with better features such as an offset account. The right reason depends on your goals.
When is the right time to refinance?
A good prompt is when your rate is well above current market rates, when a fixed term is ending, when your situation has changed, or when you want to use equity. There is no fixed schedule, it depends on your numbers.
What does it cost to refinance a home loan?
Costs can include a discharge fee from your current lender, government mortgage registration fees, and possibly an application or valuation fee with the new lender. On a fixed loan there may also be break costs. Many of these are small or waived.
How much could I save by refinancing?
It depends on the gap between your current rate and what you could move to, and your loan size. Even a small rate reduction on a large balance can save a meaningful amount over the life of the loan. A broker can model your specific numbers.
Are refinance cashback offers worth it?
Sometimes, but a cashback is only worthwhile if the loan behind it is competitive. A large cashback attached to a higher rate can cost you more over time than a smaller or no cashback on a sharper rate. Compare the whole deal.
Can I access equity when I refinance?
Often yes. If your property has grown in value or your loan has reduced, you may be able to increase your loan and release some equity, subject to your borrowing capacity and the lender accepting the purpose, such as renovations or investing.
Can I consolidate debt when I refinance?
Yes. Refinancing can roll higher interest debts such as personal loans, car loans or credit cards into your home loan, usually at a much lower rate. The trade off is that a short debt can become a long one unless you keep repayments up.
Should I refinance to a fixed or variable rate?
Fixed gives certainty and protects against rate rises but limits extra repayments and can carry break costs. Variable is flexible, usually with offset and redraw, but moves with the market. Some borrowers split the loan to get both.
Will I pay lenders mortgage insurance again when I refinance?
If you owe more than 80 percent of your property value you may face lenders mortgage insurance again, and it is generally not transferable between lenders. If you are comfortably under 80 percent, you usually avoid it entirely.
Does refinancing affect my credit score?
Each application creates a credit enquiry, which can have a small short term effect, so applying to many lenders at once is unwise. A single well matched application, with the loan paid on time afterwards, has a minimal lasting impact for most people.
Can I refinance if I am self employed?
Yes. Self employed borrowers can refinance, though lenders assess income differently, often using tax returns or, for some, alternative documentation. A clean recent financial picture helps, and the right lender choice matters more than it does for a salaried borrower.
How long does refinancing take?
A straightforward refinance often takes a few weeks from application to settlement, though it varies with the lenders involved, the valuation, and how quickly documents are provided. Having your paperwork ready is the single biggest thing that speeds it up.
What are break costs on a fixed loan?
Break costs are a fee a lender can charge if you exit or change a fixed rate loan before the term ends. They are based on movements in wholesale rates, so they can be large or small, and they are the main reason to time a refinance around your fixed term.
Should I refinance through a broker or my own bank?
Your own bank can only offer its own products, while a broker compares many lenders to find a fit, usually at no cost to you because the lender pays the broker. Going direct is simplest, but it only ever shows you one option.
General information only. This page provides general information about home loans and is not financial or credit advice, a quote, or a guarantee, and your personal circumstances have not been considered. Lending policies, interest rates, fees and eligibility vary by lender and change over time. Always confirm your own situation with a licensed mortgage broker or lender before acting. Ross McFarlane (Credit Representative 526725) is an authorised Credit Representative of Australian Associated Advisers Pty Ltd t/a Keylend, Australian Credit Licence 392169.