Pros and cons of mortgage refinancing

woman using a calculated to calculate how much she will save when she refinances her home loan

It is easy to assume that once you get your home loan, you don’t need to worry about it too much (unless you are at risk of defaulting or if you’re close to paying it off).

However, once you’ve had a home loan for a few years you should consider getting it refinanced for a better deal. When you refinance your mortgage, you move your home loan across to a new lender that may offer better rates and features that end up saving you more money.

Australians have been refinancing their loans in droves the past couple of months. The Australian Bureau of Statistics recently revealed that $17.2 billion worth of home loans were refinanced in July.

Why should I refinance my mortgage?

For starters you can find yourself saving hundreds of dollars from your monthly repayments when you refinance your loan. That extra money can go to saving up for an investment property or for paying off your mortgage quicker.

A recent case study by homeloans.com.au discovered that customers who refinanced their home allowed them to have more money in their pockets to buy investment properties. 

“After refinancing with homeloans.com.au, we were ecstatic to find out the repayments for our house went down by nearly $900 a month. This meant we had the budget available to purchase our first investment property,” said homeloans.com.au customer, Melissa Peters.

“Even while paying off two loans – the loan for our house and the loan for our new investment property – our total monthly repayments were about $160 lower than what we’d been paying for the one loan with our previous lender.”

With so many lenders offering loans under 2%, it may be one of the best times to find a better deal on your mortgage.

“Paying off a home loan isn’t necessarily a straight path – sometimes, it can make sense to make a few detours,” said homeloans.com.au chief executive officer, Scott McWilliam.

Why shouldn't I refinance my mortgage?

Just because you qualified for a home loan once, does not mean you’ll requalify. When it comes to refinancing your mortgage, you will have to submit an application as you did the first time. If your income, proof of deposit or status of employment have changed since your previous application it could negatively impact your chances for approval. If you get denied for the new application, that will be reflected in your credit history and may make the next refinance application a bit more difficult.

RELATED: Why LVR could be your best bargaining chip

If your loan-to-value ratio (LVR) is quite high, lenders may take this into consideration when checking your creditworthiness. The size of your LVR typically relates to the amount of debt you may have. The lower the LVR you have the more likely you will get a lower interest rate.

If you are thinking of refinancing your mortgage, check out Mozo’s home loan refinancing comparison hub.

Home loan comparisons on Mozo - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.

    New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

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  • placeholder
    Mozo Experts Choice 2021
    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.
    fixed 3 years
    2.24% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

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  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

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  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Refinance only. Super-fast digital application process. Zero upfront fees. No on-going service fees. Free 100% offset sub account. Apply Online & Refinance before 29 October 2021 for the chance to WIN your home loan interest free - Save up to $1.1 million. T&Cs apply.

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  • placeholder
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.32% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

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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, loan amount and term entered. 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.

^See information about the Mozo Experts Choice Home Loan Awards

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