Making the switch? 5 questions to ask when refinancing your home loan

By Evlin DuBose · · 4 min read
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Collage of a girl walking over a block, looking behind as one half falls away without her. Refinancing home loans.

With RBA rate hikes rapidly approaching their peak, more Aussies than ever are jumping ship from home loans that no longer work for them. But there are a few things to consider when making the switch: call them certified reality clarifiers. 

Here are five questions to ask when refinancing your mortgage.

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1. What don’t you like about your current home loan?

Collage of a man walking on a red speech bubble.

What’s not working for you at the moment? Seems simple enough, but starting with what’s making you unhappy in the first place is useful.

For example, are you:

  • Unhappy with your current interest rate?
  • Dissatisfied with the features?
  • Stressed about your repayments?
  • Annoyed with poor customer service? 

If the answer is ‘yes’ to only one or two of these questions, there are workarounds that don’t involve refinancing. For instance, you may be able to negotiate a better interest rate or devise a game plan for staying on top of your repayments. Most lenders would much rather work with you than lose you!

However, refinancing could be a clean slate if the problems have been piling up for a while now. It all depends on what feels like a dealbreaker to you.

4 signs you should break up with your lender

2. What features are you looking for?

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Home loans can come with a suite of features, so it’s important to know which ones you’re after. Here are some common ones, and why they’re useful.

  • Offset account. An offset account is a type of bank account attached to your home loan that reduces interest on your repayments. Essentially, you only pay interest on the loan debt minus the balance of your offset account. So if you borrowed $500,000 and have $20,000 in a 100% offset account, you ultimately only pay interest on $480,000. 
  • Free extra repayments. Free extra repayments mean if you find yourself with extra cash on hand (maybe after a nice tax return), you can put it towards your home loan to pay it down early. Paying down more of your principal now can help you save on interest later. Some lenders will let you make extra repayments but they may charge you a fee or limit the amount you can put in, so it’s important to pay attention to the strings attached. Make sure ‘free’ actually means free!
  • Redraw facility. Making extra repayments can be handy, but what happens if you need the funds back later? A redraw facility lets you dip back in. 
  • Discounts. Mortgages designed for refinancers may come with discounts, such as a two-year introductory interest rate or a cumulative discount like Unloan. You may also get perk discounts for other banking products from the lender: it’s useful to check out all the bells and whistles, because saving in one area of life could mean having more for another.
  • Cashback. As a happy bonus, many lenders even offer up to $5,000 cashback when you refinance. It shouldn’t be the only reason to switch, but it can certainly sweeten the deal.

3. What’s your budget for repayments?

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Same as the first go around, put yourself through a DIY serviceability test and figure out your budget. How much can you afford to pay? Consider interest, fees, and monthly repayments.

Running your numbers through a mortgage calculator can help show you your upper and lower limits in terms of interest rates, loan terms, and however much is left on your principal balance. Arming yourself with some specific numbers can make sorting through offers that much easier.

PRO TIP: Be wary of introductory or welcome interest rates when making decisions about variable home loans. If the interest rate reverts after two years to something outside your budget, you’ll need a Plan B.

4. What is your equity and property value?

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When refinancing your home, it’s vital to consider how much you’ve already paid into it. Your new lender will want to get a property valuation done to establish your equity, which is reflected in your loan-to-value ratio (LVR).

If your property has experienced capital growth, the value has increased and thus you likely have more equity. If your property has lost value, you may have lost equity. 

Some refinance offers have minimum LVRs you need to qualify for. Most of the lower interest rates on the market also require a low LVR (generally under 80%), so if you bought at a high LVR relatively recently, you might still need to qualify for the rate you want.

5. What timeframe are you thinking about?

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Time is money, so if you’re planning on selling your home soon, refinancing now might not give you enough time to make the savings financially worthwhile. However, refinancing can be a game-changer to your budget if you’re in it for the long haul. 

You may also want to consider what loan term you’re looking for since longer terms can add to the amount of interest you ultimately pay and drag out the timeline of your repayments. However, shorter loan terms may mean more expensive monthly repayments because you’re paying off bigger chunks of your principal.

Alternatively, now’s a great time to weigh the pros and cons of fixing your interest rate for a few years.

BONUS! What’s your credit score?

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Not many people think about their credit score, but it’s a vital part of the home loan process. Request a free credit check to make sure you’re in the right place. 

Compare refinancing rates on home loans below.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 27 July 2024 Important disclosures and comparison rate warning*

Promoted

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • OMG Home Loan

    • Owner Occupier
    • Principal & Interest
    • <60% LVR
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.

  • Flex Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.99 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.01 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,001
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Flex Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.38 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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