Refinancing home loan mini guide: Features and fees

Man using a magnifying glass to inspect paperwork

Refinancing your mortgage means switching your home loan over to a different lender and/or plan. 

You might be considering this course of action if your circumstances have changed since you first took out a home loan. Maybe your finances have taken a serious hit because of rising interest rates and you’d like to go on a reduced payment plan, for example. 

Or maybe it’s been some time and you’re wanting to find out whether you’re missing out on any new home loan features that might be beneficial to you. Some, such as an offset account, aren’t always available and yet can help make paying off a home loan easier. 

These are valid points. Wondering whether your current home loan is still right for you is a smart question to ask. 

So below, we’ll get into more reasons why refinancing can be a good thing.

Is it in your best interest to refinance? Get to know the main features

Man balances on a wooden plank to juggle a piggy bank and a home on top of a coin

Switching over your home loan can bring about many benefits, some of which include:

A lower interest rate. It’s possible that you will pay a lower rate percentage over the life of your home loan.

Lower ongoing fees. These can add up to a hefty sum as time goes on, and switching your home loan might lessen the amount payable overall.

Consolidate your debt. Having all of your eggs in one basket isn’t always a bad idea. For instance, if you also have a personal loan, car loan, or credit card, consolidating your loans into your mortgage keeps it all in one place for easier money management.

Repayment frequency. Schedule your payments on a weekly, fortnightly, or monthly basis to better fit your situation.

Cashback reward. Some lenders might offer this loan incentive by giving you money if you refinance your loan with them. 

Access to equity. Whether your reasons are for travel, investing, renovating or the like, accessing your home equity is something refinancing your loan can possibly do.

A split loan. There are two rate types: a fixed interest rate, which means paying a fixed amount for a set period of time, and a variable interest rate, where the amount you pay can fluctuate over the life of the loan. A split loan is paying some of your loan with a fixed rate, and the rest with a variable interest rate.

Features. An offset account can be one of them. It works like an everyday account, but is linked to your home loan. An offset account lets you make withdrawals and deposits. Another feature is a redraw facility. It allows you to access the extra payments you’ve made on your home loan which can be helpful. 

In saying that, there are home loan options that enable you to make free extra repayments on your mortgage. You might pay off your loan quicker, which can also mean that you end up having a shorter loan period. 

But while it’s true that there are many advantages to refinancing your mortgage, there are also some disadvantages.

Refinancing costs: Fees, fees, fees

There are two hands. One is holding a bag of money, and the other is holding a house. They are in the process of exchanging hands.

The process of switching your home loan can require you to submit your personal and financial details. It might take some time for your application to be approved, and you may have to pay additional fees. 

Here are a few examples of where fees may be incurred:

  • Home loan application
  • Settlement fee
  • Loan establishment fee
  • Mortgage registration fee
  • Monthly account keeping fees
  • Annual fees
  • Search title fee.

The fees you might be expected to pay when refinancing your loan will be subject to your lender, and of course the type of loan you select. 

Furthermore, switching your home loan has the potential to affect your credit score, but this, too, depends on a number of factors. For instance, how many home loan applications you’ve applied for and the time between each application.

Finally, if your repayment plan ends up being ‘cheaper’ with lower repayments, your loan term might be extended. It also means that you end up paying more on interest over the life of your loan. Conversely, if the duration of your loan is shorter, you are likely to make much higher repayments towards your mortgage and will pay less interest overall. These factors are definitely something to think about.

So, if you believe that refinancing your mortgage might still be the right move for you, but you don’t know what products are available - we’ve got you covered. 

Compare your home loan options

At Mozo, we analyse some of the best home loans on the market. Our experts have gathered a few of these options below for you to begin your property buying journey. So why not start comparing home loans today!

Refinancing comparison table - last updated 11 December 2023

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* 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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