Refinancing can sound simple: find a better rate, switch lenders and hopefully save money.
But a refinancing home loan decision involves more than comparing two interest rates. You need to look at the costs of switching, the features you currently have, your financial position and whether the new loan actually improves your situation.
With home loan interest rates continuing to influence household budgets, refinancing can be an opportunity to review your current loan and see whether a different option could better suit your needs.
Before making a decision, here are the key things to check.
Want to explore your refinancing options? Speak with Winning Wealth Finance today.
1. Check Your Property Value and Equity
Your property’s current value can affect your refinancing options.
Lenders may consider your property value, outstanding loan balance and resulting equity when
assessing a new application.
If your property has increased in value since you bought it, you may have built up more equity.
However, it’s important not to assume a particular value without a suitable assessment, as a
lender may arrange a valuation during the application process.
Understanding your equity position can help you and your broker assess what lending options
may be available.
Before starting a refinancing home loan application, make sure you have a clear picture of your
existing mortgage and property position.
2. Look Beyond the Interest Rate
When comparing home loan interest rates, a lower rate can certainly be attractive.
However, the rate is only one part of the overall loan.
Look at the comparison rate, fees, loan features and repayment structure. Consider whether the
loan is fixed or variable and what flexibility you’ll have if your circumstances change.
For some homeowners, moving to a lower rate may provide meaningful savings. For others, a loan
with different features or a more suitable structure may be more important.
3. Understand the Refinancing Costs
Before switching your home loan, it can be helpful to review ASIC MoneySmart’s guidance on
switching home loans. It covers the key costs to check, how to compare potential savings and
what to consider before moving from your current lender.
There can be several refinancing costs, depending on your current loan, new lender and loan
structure. These may include application fees, valuation fees, discharge fees and other lender
or government charges.
If you’re moving away from a fixed-rate loan, you may also need to check whether an early
repayment or break cost applies.
Instead of looking only at how much the new loan could save, consider the complete picture:
Potential savings − switching costs = potential overall benefit
Understanding the full refinancing costs can help you compare your options more accurately and
avoid surprises during the process.
4. Check How Your New Repayments Could Change
A lower interest rate can reduce your repayments, but the repayment amount also depends on
your loan balance, remaining term and repayment frequency.
If you extend the loan term when refinancing, your monthly repayments may become lower, but
you could potentially pay interest for longer.
Before choosing a refinancing home loan, compare the repayments under both loans and consider
the overall cost across the remaining term.
It’s also worth thinking about how your repayments would fit into your household budget if
home loan interest rates changed in the future.
You don’t need to predict exactly where rates are heading. The important thing is to make sure
the proposed repayments are manageable for your circumstances.
5. Review the Loan Features You Actually Use
Your current loan may have features that provide useful flexibility.
An offset account, for example, can help reduce the amount of your loan balance on which
interest is calculated. A redraw facility can also provide flexibility if you’ve made
additional repayments.
When comparing a mortgage loan refinance, check whether the new loan provides the features
that matter to you.
Look at:
- Offset account availability
- Redraw facilities
- Extra repayment flexibility
- Fixed or variable rate options
- Loan fees
- Repayment frequency
- Online account access
The right loan isn’t necessarily the one with the lowest advertised rate. It should also have
features that work with the way you manage your finances.
6. Compare Your Current Loan With the New One
Start with the loan you already have.
Look at your current interest rate, remaining balance, loan term, repayments and any features
you regularly use. Then compare these with the proposed new loan.
When considering a refinancing home loan, don’t focus only on the headline interest rate.
A slightly lower rate may not provide the best overall value if the new loan has higher fees
or doesn’t offer the features you need.
For example, you may currently have an offset account or redraw facility that helps you manage
your finances. If the new loan doesn’t offer an equivalent feature, it’s worth considering
how that could affect you.
7. Review Your Current Financial Position
Refinancing still involves a new lending assessment.
Your income, employment, existing debts, expenses and credit history can all be relevant when
applying for a new loan.
Think about how your financial position has changed since you first took out your mortgage.
Perhaps your income has increased, your debts have reduced or your household circumstances
have changed. These factors may influence the type of loan that could suit you today.
Reviewing your current position before applying can help you approach the refinancing process
with a clearer understanding of your options.
This is why comparing the complete loan package can be more useful than simply choosing the
lowest advertised rate.
8. Work Out Your Potential Break-Even Point
Once you’ve calculated your potential savings and refinancing costs, consider how long it
could take to recover the costs of switching.
For example, if switching loans costs $2,000 and the new loan could save you $200 a month,
it would take around 10 months to recover that initial cost, before considering other changes
to the loan.
This gives you a simple way to understand how quickly the potential benefits could outweigh
the initial costs.
Your expected timeframe also matters. If you plan to sell the property or make another major
financial change soon, this may influence which refinancing option is most suitable.
9. Consider What You Want From Your New Loan
Refinancing doesn’t have to be only about securing a lower rate.
Your priorities may have changed since you first arranged your mortgage.
You may now want:
- A more competitive interest rate
- Greater repayment flexibility
- An offset account
- Different fixed or variable rate options
- A loan structure that better suits your current finances
- Access to equity for an appropriate financial goal
- A different repayment arrangement
Knowing what you want from your new loan makes it easier to compare options based on your
actual needs.
Thinking about refinancing your home loan?
Contact Winning Wealth Finance today to discuss your circumstances and take the next step.
Refinancing Home Loan Checklist
Before moving ahead, use this checklist to review the key areas of your mortgage:
- ☐ Compare your current interest rate with suitable alternatives
- ☐ Review your remaining loan balance and term
- ☐ Compare your potential new repayments
- ☐ Calculate all refinancing costs
- ☐ Check the loan features you currently use
- ☐ Review your property value and available equity
- ☐ Check your income, expenses and existing debts
- ☐ Review the new loan’s fees and comparison rate
- ☐ Consider fixed versus variable rate options
- ☐ Calculate your potential savings
- ☐ Work out your potential break-even point
- ☐ Make sure the new loan aligns with your current financial goals
This checklist can help you have a more productive conversation with your mortgage broker and
compare your options with greater confidence.
When Could Refinancing Make Sense?
There are several situations where homeowners may want to review their mortgage.
You might consider refinancing if:
- Your current interest rate is no longer competitive
- Your financial circumstances have improved
- You’ve built equity in your property
- You want different loan features
- You want greater repayment flexibility
- Your current loan structure no longer suits your needs
- Your existing lender isn’t offering a suitable option
Your reason for refinancing matters because it can influence what type of loan you should be
comparing.
For example, someone primarily looking to reduce their interest costs may have different
priorities from someone who wants an offset account or greater repayment flexibility.
The aim is to find a lending option that better fits your current circumstances and financial
goals.
What About Fixed vs Variable Rates?
If you’re considering refinancing from a fixed loan, check the conditions before making a move.
Breaking a fixed-rate loan before the agreed end date can result in additional costs, so these
should be considered when reviewing your options.
If you’re moving to a variable loan, you should also consider how changes in home loan interest
rates could affect your future repayments.
There isn’t one loan structure that works for every homeowner. The right option depends on
your financial circumstances, priorities and how much repayment flexibility you want.
How Can Winning Wealth Finance Help?
Refinancing can involve more decisions than simply choosing a lower interest rate.
At Winning Wealth Finance, the focus is on understanding your circumstances, comparing
suitable lending options and helping you make sense of the numbers before you commit to a
new loan.
Whether you’re considering a mortgage loan refinance because of your current rate, changing
financial circumstances or a need for different loan features, getting a clear picture of
your options can make the process easier.
Explore Winning Wealth Finance’s services to see how we can help with your lending needs.
Frequently Asked Questions
What is refinancing a home loan?
Refinancing means replacing your existing mortgage with a new loan, usually with a
different lender or a different loan structure. Homeowners may refinance to pursue a
more suitable interest rate, features or repayment structure.
How much can I save by refinancing?
The potential saving depends on your current loan, new interest rate, outstanding
balance, remaining term and switching costs. Comparing the total cost of both loans
can give you a clearer picture than looking at the interest rate alone.
What refinancing costs should I consider?
Potential costs can include lender fees, valuation fees, discharge fees and, in some
cases, early repayment or fixed-rate break costs. The costs will depend on your
existing loan and the new lending arrangement.
Does refinancing affect my credit score?
Applying for a new loan can involve credit checks, so it’s worth understanding the
lender’s application process before submitting an application. Your broader credit
history and financial circumstances can also affect your application.
Should I refinance if interest rates fall?
A lower rate can be a reason to review your mortgage, but it’s important to consider
the complete loan. Compare the potential savings with the associated costs, features
and repayment structure before making a decision.
How often should I review my home loan?
There isn’t one timeframe that suits every homeowner. It can be useful to review your
loan when your financial circumstances change, your current rate becomes less
competitive or your existing loan no longer meets your needs.
Thinking about refinancing? Explore your finance options with Winning Wealth Finance.
Make Your Next Refinancing Decision With Confidence
Refinancing can be an opportunity to review your mortgage and find a loan that better suits
your current circumstances.
Before making a move, compare the loan rate, repayments, features and refinancing costs.
Look at your property position, financial circumstances and what you want from your next loan.
Most importantly, don’t make the decision based on one number alone.
A good refinancing home loan decision should consider the bigger picture and how the loan
fits into your financial plans.
Thinking about refinancing? Explore your finance options with Winning Wealth Finance and take
the time to understand what could work for you.
General information only. Lending criteria, fees, interest rates and approval requirements
vary between lenders. Consider your circumstances and seek appropriate financial advice
before making a borrowing decision.