Compare refinance home loans for January

What is refinancing your home loan?

Unhappy with your home loan? Refinancing is the process of switching from one mortgage to another, and you can do this by negotiating with your current lender or swapping to a new provider.

Some good reasons to refinance your home loan include:

• Securing a lower interest rate.
• Reducing monthly repayments.
• Changing loan terms.
• Consolidating debt.
• Switching home loan lenders.

Ultimately, the purpose of refinancing is to save money, time, or stress – ideally, all three at once.

Why would you want to refinance your home loan?

There are several reasons to refinance your mortgage. Let’s run through a few.

Lowering your interest rate or changing terms

You can refinance simply to secure a better home loan interest rate or to change the length of your loan.

For example, you could refinance to a lower interest rate and extend your loan term to lower your mortgage repayments.

However, if you’re able to refinance and shorten the length of your home loan, you’ll pay less interest overall.

Refinancing can also be a good idea if you’re coming off a fixed rate home loan and you want to change your loan type. If this is you, you might want to compare variable rate home loans or consider a split home loan.

You may also want to refinance to gain access to home loan features you don’t currently have, such as an offset account or a redraw facility.

Cash-out refinancing

If you’ve built up considerable home equity, it’s possible to refinance your home loan to get cash out.

Your home equity is the market value of your property minus the mortgage debt you have on it. In other words, it’s how much of your property you already own.

To get cash out, you refinance your home loan and borrow from the equity you’ve built up overtime.

Note that this can increase your home loan repayments and extend your loan term.

However, it can also be a useful way to fund projects, such as using equity to buy an investment property or pay for home renovations.

Debt consolidation refinancing

Debt consolidation loans combine multiple loans you may have, such as credit card debt, personal loans and a mortgage into a single loan.

It can be a useful way to tackle outstanding debt, and may save you on paying interest across multiple loans.

However, note this can also spread debt over a longer period of time and increase your interest rate.

Key considerations before refinancing

Before you refinance your home loan, ask yourself some basic questions and consider the pros and cons of refinancing.

How much does it cost to refinance?

There are costs to refinance your home loan.

For example, you may have to pay fees and penalties for leaving your old home loan, such as a discharge fee and a break fee if you decide to leave a fixed rate home loan early.

You’ll often need to pay fees when taking out a new home loan as well, such as an application fee and a property valuation fee to name a few.

Can I refinance my home loan more than once?

If you’re wondering how often you can refinance your home loan, you can do it as many times as you like. But there are a few things to keep in mind before doing so.

Every time you apply to refinance, it registers as a hard inquiry on your credit report, and lodging too many hard inquiries in a short period of time makes you look desperate for credit and therefore a home loan red flag.

The process of refinancing also costs money and takes time and effort, so you’ll only want to refinance if it makes good financial sense and is worth your personal investment.

How to refinance your home loan

Refinancing follows a similar process to taking out your initial home loan – the main difference is you already have the property.

Here’s how to refinance your mortgage, step-by-step.

• Budget and save: Get your finances in order at least three months before you refinance. Check your spending and credit history.
• Compare home loans: Identify what you want from your new mortgage and compare home loans – you might want to look for a lower interest rate, better features and less fees.
• Apply: Ready to switch? Get your refinance application ready to show your new lender why you’re a good bet.

What documents do you need to refinance?

Refinancing is similar to lodging your home loan application again. This means you’ll need identity documents, financial statements and your property information. 

Here’s an example of home loan documents you might need to refinance. Keep in mind if you’re swapping to a new home loan lender, it might require additional supporting documents.

Identity documents

• Primary identity documents, such as your passport or driver’s licence.
• Secondary identity documents, such as your Medicare card.

Financial documents

• Income statements.
• Tax returns.
• Bank statements, to show genuine savings.
• Household spending statements.
• Liabilities and debts, such as car loans or credit cards.
• Asset statements, such as for share portfolios.
• Credit history.

Property documents

• Property details.
• Property valuation report.
• Current home loan statement, to prove home equity.
• Home insurance certificate, if applicable.
• Council rates notice.

Refinancing calculators and tools

How much can you save by refinancing? It depends on the borrower and lender. Mozo has free home loan calculators that can make it easy to crunch your costs. 

Use these handy tools to calculate your borrowing power, estimate potential savings and compare refinance home loans. Get started below.