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REFINANCING
Refinancing Your Mortgage:
The mortgage market today is extremely competitive, with there being many different products offered by a range of lenders. By refinancing your home loan, you can potentially get a better rate and also find a product that better suits your circumstances!
What is refinancing?
Refinancing your home loan is essentially switching your loan to a different lender, or switching to a different loan product with your existing lender.
Why should I refinance my loan?
There are a variety of reasons why people refinance their loans. The most common are to achieve a better interest rate, reduce fees paid or to obtain equity. Additionally, you can also refinance your house and use the equity in your property to repay other debts such as credit cards and personal loans. You may also be seeking a loan product and lender that better suits your individual needs and expectations.
What are the advantages and disadvantages of refinancing?
Advantages:
- You can get a better interest rate.
- You can reduce the amount that you pay in fees.
- You can select a new repayment type of interest rate type that better suits your wants and need.
- The new lender may provide better customer service.
Disadvantages:
- You may not find an interest rate than the one you currently have.
- You will have to pay discharge fees to switch your loan.
- There will be upfront fees associated with your new loan.
- If your current loan is on a fixed rate, they may be break costs.
When Shouldn’t I Refinance?
We do not recommend refinancing your home loan when you have a fixed rated home loan, because there will be break costs associated with the refinance. Additionally, if your property has fallen in value, or if you loan still currently exceed 80%, we do not recommend refinancing your loan, as it will be likely that you have to repay LMI fees.
How much will it cost me to refinance?
Exit costs of old loan
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Discharge fees. $200 - $400. These are usually charged by your old lender to give you back your title deeds.
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Exit fees. $varies. If your loan was entered into before 1 July 2011 you may still have to pay mortgage exit fees, even on a variable rate home loan. These can be quite expensive, but you might be able to get a discount from your lender. If you have a fixed rate home loan, you’ll still have to pay exit fees as your lender could be losing out by letting you leave your loan.
Upfront costs of new loan
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Application/establishment fees. $200 - $600. These fees cover the initial costs of setting up your home loan.
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Valuation fees. $100 - $300. Your new lender will want to have your property valued to decide how much to lend you. This fee covers the cost of an independent valuer.
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Settlement fees. $100 - $300. This fee covers the cost of your lender arranging your funds.
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Legal fees. $75 - $150. These fees cover the cost of your lender's solicitors which arises out of your application.
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Stamp duty. $varies. You may have to pay stamp duty when refinancing, which is charged by the state. We have a stamp duty calculator you can use to get an estimate of how much you might pay.
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Lender’s Mortgage Insurance (LMI). $varies. If you’re borrowing over 80% of the property value you could have to pay LMI premiums. This can cost well into the thousands, and depends on how large your loan is and how much equity you have.
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Ongoing costs. $varies. A home loan might keep charging you fees even once you’ve settled. Things like redraw fees, monthly fees or annual fees should be taken into account.
Want to compare the expenses of two loans? Use our loan switching calculator
Are there any tax implications when refinancing?
There might be tax implications for you depending on your situation and whether the property is an investment or not. It’s always wise to speak to an accountant first.
Should I review my home and contents insurance too?
If your looking to review your current home loan for a better rate, it could also be a good time to review your current insurance polices to ensure you have an adequate level of cover in place at a competitive price. Many lenders will require that you have at least home insurance to protect the property. Most insurance consultants will recommend you review your life insurance policy annually to ensure it still measures up to your financial obligations. It could be worth making a free enquiry with a consultant to find out what else is available and if your better off refinancing. Protect your loved ones and loved possessions with home insurance.
What documents do I need to supply?
Generally you’ll need to provide proof of your salary and other income, government payments, home loan statements and a copy of your council rates notice. Statements for any liabilities and either your drivers licence or passport. Once your information has been reviewed, your lender can normally give you a response fairly quickly. The verification, valuation and assessments, approval and settlement can take up to a month or more to complete depending on your financial situation.
Related Posts
How much will it cost me to refinance?
When you are refinancing your home loan it is important to know all the costs involved. Calculate how much it will cost you with this detailed analysis of an average refinance.
How to Find the Best Refinancing Deals*
Refinancing your loan can bring about some great benefits in form of savings. There are various ways to get refinancing and this could be with your current lender or you could move to a different lender. Remember that the best deal is one that suits your needs and provides the best long term savings. Get the best refinance deal by comparing what different providers have to offer.
Find out how much you'll actually save with a home loan refinancing calculator
When you are thinking of refinancing, it is important to know the costs involved. Shirley Liu runs you through the ins and outs of our refinancing calculator and how you could save money.
What Is Home Loan Refinancing?
Whether you need access to your equity, or want to lower your mortgage repayments, refinancing your home loan is a viable method to wealth creation.
How to Switch Home Loans and Lenders
When you are thinking of refinancing or switching loans you should make sure you know the ins and outs of what to be wary of.
Is now a good time to refinance your mortgage?
If you have been thinking of refinancing, how do you know it is the right time? Read our tips from the experts.
Home loan exit fees can make all the difference between a seemingly good deal and one that goes sour.
If you want to pay off your home loan ahead of time or want to refinance an existing home loan you should be wary of the exit fees you might have to pay. While the 2011 ban on exit fees does make matters simpler if you’ve got a variable rate home loan, if you’ve got a fixed rate loan you’ll still have reason to watch out for them. Even a variable rate loan can attract fees in other forms if you decide to repay it before the term is actually over.
Exit fees can come in the form of discharge fees, early termination fees and break costs. Lenders have these in place primarily to deter borrowers from changing loans frequently, but also to cover costs they incur as part of the process.
Exit fee ban
Exit fees, until lot so long ago, discouraged many borrowers from switching loans, given that they often amounted to thousands of dollars. However, as part of reforms to some banking products, government regulations banned lenders from charging exit fees for all variable rate home loans taken out after 1 July 2011. This move came about after the government felt that exit fees served as a major impediment for people trying to switch loans or pay them off early. Fixed rate home loans and variable rate loans taken before 1 July 2011 will still attract exit fees, but anecdotal evidence suggests that if some lenders will waive or discount the exit fees on some variable rate home loans taken out before the ban.
While the government banned exit fees for variable rate loans, lenders can still charge legitimate administrative costs. Discharge fees vary from $150 to $400 and this is what you’ll have to pay to get a hold of your title deeds. Lenders can also charge what they refer to as ‘early discharge’ or ‘early termination fees’. You might have to pay this if you repay the loan amount completely within a stipulated time frame, for example within the first five years. The flipside is that the law states that these charges cannot exceed the losses incurred by lenders owing to such early loan terminations. The most important takeaway to remember is that if you feel these charges are excessive or unfair, don’t hesitate to lodge a complaint with your lender.
What are the big four banks' home loan exit fees?
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Westpac charges $350 in discharge costs for their Rocket Repay Home Loan
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CBA charges a discharge fee of $350 for their Standard Variable and Base Home Loans but do not charge a fee for their No Fee Home Loan.
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NAB charge $350 in discharge settlement fees for their Tailored Home Loan
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ANZ charge $160 in settlement fees (in addition to other fees to access government records and to lodge paperwork).