Give yourself an instant pay rise by refinancing your home loan 

Thanks to the Reserve Bank of Australia's unprecedented rate hike cycle, the cost of financing a home loan has surged.

If you haven't taken a look at your mortgage in a hot minute, now's a good time to take things into your own hands and make payday come early by switching to a better home loan deal.

Refinancing to a home loan with a lower interest rate will not only lower the interest you pay, thus freeing up extra cash, but will also reduce your home loan repayments, making budgeting for the rising cost of living a much easier feat.

So how much could you potentially save?

Lenders compete for your business the most, although many variable rate offers barely drift below the 6.00% p.a. mark these days.

RELATED: Home loan rate check: How do ANZ, CBA, NAB and Westpac compare?

To give you an idea of how much switching to a lower rate deal could save you, here’s a quick comparison:

Say your current rate sits at 6.50%, on a $500,000 home loan with 20 years left. According to the Mozo home loan repayments calculator, your current monthly repayments would be $3,582 and the interest you’d pay over the remainder of the loan would be $359,717.

But if you are savvy and switch to a low rate home loan offered exclusively to owner occupiers  with, for example, a 4.89% variable interest rate (the current best in Mozo’s database), your repayments would drop down to $3,269 each month and the interest you’d pay over the remainder of the loan would be $284,673.

• Monthly pay rise = $313
  
• Pay rise over 20 years = $75,044

While it’s true investors often get saddled with higher interest rates than owner-occupiers, it doesn’t mean there aren’t plenty of ways to cut the costs of your loan.

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For the sake of consistency, let’s use the same example as above of a $500,000 home loan paid back over 20 years, making both principal and interest repayments. 

Say your current home loan rate is 7.00%. This means your monthly repayments would currently be $3,876 and the interest you’d pay over the remainder of the loan would be $430,359.

But if you made the switch to, for example, a loan with a 5.15% variable interest rate (the current best in Mozo’s database), your monthly repayments would drop down to $3,341 and the interest you’d pay over the remainder of the loan would be $301,924.

• Monthly pay rise = $535
  
• Pay rise over 20 years = $128,435

As you can see, the potential money up for grabs by making the home loan switch is big. Considering savings accounts and term deposits have risen too, this could be considerable money back in your pocket for a future rainy day. Vive lé refinance!

Punch in your details into our home loan comparison calculator to see how much you could save by making the switch.