Refinancing your mortgage

If you’re keen to secure a better interest rate or enjoy more loan features, refinancing your home loan can be the solution. Refinancing is also an opportunity to get control of debt or tap into any home equity you’ve built up.

The most popular reason home owners choose to refinance a home loan is to secure a lower interest rate and reduce their monthly repayments. However, refinancing can come with some costs, so it's essential to weigh up the savings of refinancing against the expense involved.

If you'd prefer the certainty of repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Refinancing your home loan lets you do this. Or, you may decide you'd like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.

Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals. Find out more about accessing your home's equity.

Like many Australians you could have several debts – probably a home loan, a personal loan, and possibly even a credit card balance. Having multiple debts means juggling lots of different repayments.

Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you're paying on multiple debts through the process of 'debt consolidation'. It means folding several high interest debts into one lower rate debt – which could be your home loan - and this may reduce your total monthly repayments.

However, it's important to note that debt consolidation can come with some downsides. It can turn a short term debt like a personal loan into a long term debt (your mortgage), and that means paying interest on the balance for a much longer period which could cost you more in the long run.

For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.

Flexible repayments

Making extra repayments at no additional cost to help pay off the loan sooner.

Repayment holiday

A break from repayments or reduced repayments to cover career changes or breaks e.g. maternity leave.

Offset account

Having a savings or transaction account linked to your loan. The balance of the linked account is deducted from, or offset against, the balance of your loan when the monthly interest charge is calculated.

Redraw facility

Enabling you to withdraw any additional repayments you have made on your loan. Handy if you need cash in an emergency.

Flexible rate options

Dividing your rate between fixed and variable components, or even making interest-only payments for a period.

Loan portability

The ability to take your loan with you when you move from one home to another without the expense and hassle of arranging a new loan.

When you refinance, your new lender may charge a range of upfront fees. However not all lenders charge these fees and some may be negotiable.

They may include:

• Loan application fee - charged when you apply for a new home loan
• Valuation fee - your lender may charge a fee to have your property valued by a professional property valuer
• Settlement fee - your lender may charge a fee to pay out your current mortgage

Some states charge a tax on your mortgage which is known as stamp duty, which is calculated on the amount of the loan. If you increase the size of your loan when refinancing, stamp duty may be payable.

You may also need to pay a Mortgage Registration Fee which is imposed by the Land Titles Office (or equivalent) for registering your mortgage onto the title record for the property.