How much could you save by refinancing your home loan?

When you refinance your home loan, it’s often to get a better interest rate than you have on your current home loan, in order to pay off your mortgage faster like a pro. This will save money in the long term.

Refinance your home loan at a glance

When you refinance your home loan, it’s often to get a better interest rate than you have on your current home loan, in order to pay off your mortgage faster like a pro. This will save money in the long term. Whether you’re an owner/occupier or own an investment property, you can refinance through the same lender or switch to a different credit provider altogether. Because lenders don’t tend to reward their customers for loyalty, it’s worth noting that you typically get a better rate when you go to a new lender. At uno, we recommend people check their interest rate every two or three years. Lenders tend to increase their rates during this time, so it’s worth exploring if there are better ones on the market. It’s like that time you bought the Nokia 5410i and it was the coolest phone around and you could play Snake all day… but then the iPhone came out and you realised that was a much better option.

Benefits of Refinancing:

  • Get a better rate / lower your monthly repayments
  • Access the cash (equity) in your home
  • Consolidate debt
  • Adjust the loan term
  • Switch from a variable rate to a fixed one, or vice versa

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Is it just about the interest rate?

One of the main reasons homeowners choose to refinance is to get a lower interest rate. You might have purchased your home years ago and, in that time, rates might have fallen, meaning you could be paying more than you have to. Or perhaps when you bought your place for $800,000, you had a deposit of $200,000 and a loan of $600,000, meaning you had an LVR of 75% and were only eligible for a certain number of rates. Now that you’ve paid it down to $500,000, your LVR has dropped to 62.5% and you’re eligible for a better rate. Also, lets not forget the new banking policies and conditions and new home loan products that are coming to the market. The truth is, it could be a number of different things that impact the health of your home loan. So it is always good to have a closer look.

Access the cash (equity) in your home

Some people refinance to access the cash (equity) in their home in order to pay for something big like renovations, a holiday to Maui or their daughter’s second wedding. We’ve had customers who’ve used equity to pay off their solar installation and buy a car – the possibilities are endless. Find a cash-out refinance deal

Consolidate debt

This works well if you have several debts on top of your home loan, such as a personal loan, car loan and credit card debt. Pulling these debts into a new home loan allows you to enjoy the lower interest rate that most home loans offer compared to other forms of credit. (Credit card debt could be between 9.99% p.a. and 21.99% p.a., for example.) It does, however, mean paying interest on the combined balance for a longer period of time (the length of the home loan), so it’s important to make additional repayments to pay off the enlarged loan sooner – or pay off a big chunk when you can.

Tips for consolidating debt by refinancing:

  • Pulling high-interest debts like credit cards into your home loan could let you enjoy a lower interest rate
  • However, if you don't grab the bull by the horns, you'll be paying interest on the combined balance for a longer period of time
  • Win this battle by increasing the size of your repayments
  • You can also make one-off payments if you find yourself with some extra cash

Adjust the loan term

Sometimes people change to a longer loan term, even if it’s only in the short term. That sounds confusing. What we mean is they may come into some unexpected financial difficulty, such as a family member getting sick and needing medical treatment; or a car accident that leads to someone being out of work for a period of time. In these situations, the person needs to minimise their repayments and it’s worth it to them to restructure their loan over a longer term (and pay a bit more interest in the long run) to alleviate financial stress. One of the lenders UNO works with offers a 40 year loan term, for this reason. Explore my options

Switch from a variable rate to a fixed one, or vice versa

Lenders tend to put those who’ve been on fixed rates onto a higher rate at the end of their term. This is a good time to switch to another rate. Or perhaps you’ve been on a variable rate but want to take advantage of low interest rates so you want to switch to a fixed rate. Refinancing enables you to do these things.

Access additional features

Different home loan products come with different features. Another reason to refinance is to access features that you were previously unable to access, such as the ability to make extra repayments at no additional cost, a repayment holiday, linking an offset account or redraw facility. Loan products improve over time, so the financing arrangements you made 15 years ago may not keep pace with what’s on offer today. While basic home loan packages may offer simplicity and low fees, you could be missing out on a lot of extras that could help you better manage your finances or pay your home loan off faster. If you do switch rates, you should take note of any ongoing fees and terms and conditions that might be included in your new home loan product. You can read more about home loan products and features.

Features that could help you pay off your home loan faster:

  • Additional repayments – this allows you to make extra loan payments without incurring a cost. Some lenders will limit the number of additional payments you can make.
  • Redraw facilities – you can draw back any of your additional payments as required. This could be useful should you need emergency funds.
  • Repayment holidays– this feature allows you to take a break from repayments for an agreed period. This could be useful if you enter maternity leave or take an unpaid sabbatical.
  • Reduced payments – this works the same way as the repayment holiday, except that you pay a reduced amount (rather than nothing at all) for the agreed period.
  • Offset account– you can use your savings to offset the principal of the loan. This means that you pay less interest over time, and can get your loan paid off faster.
  • Portability – this allows you to transfer the loan to a new property with the same lender should you choose to move home.
  • Flexible rates – some lenders allow you to structure your home loan so you can choose between paying a fixed or variable rate as it suits you.

Refinance for a better rate vs. home equity loan / cash out finance

Many people refinance simply to get a better rate. They may have bought their home 15 years ago and become complacent, never buying it flowers anymore and failing to check whether they could switch to a better deal. If it turns out there is a better deal for you, switching your rate can be a great way to save money. You’ll likely pay less interest than you were paying before and with the extra money in your pocket you can do a whole gamut of wondrous things, such as buy that jetski you’ve always wanted (no judgement here), or book that trip away without the kids. Cash out refinance is a different kettle of fish altogether. In this situation, people gain access to the cash in their home. It’s not literally in their home under the floorboards or anything like that (“There’s always money in the banana stand!” – George Bluth) but refers to the difference between the value of your home and the amount you still owe on it. Thanks to the significant rise in property prices over the last decade or so, it could be a substantial sum. For example, let’s assume you bought a house 10 years ago for $500,000 and have $200,000 left on the home loan. If this property is now valued at $800,000 then your equity is $600,000. Most lenders allow borrowing of 80% of the value of the property, minus the debt that you have left to pay. So in this example, you could access $440,000 of your equity. With this sum, you could make significant investments and potentially take advantage of tax benefits – such as depreciation and negative gearing on an investment property – to get your money working for you. Both ways of refinancing are essentially designed to save you money – but not everyone will have equity in their home, whereas if you purchased your home years ago, there’s a good chance you now qualify for a better rate. Research we commissioned found homeowners who stick to their current interest rate end up paying $1,092 more per year on a $500,000 mortgage or $32,760 over a 30-year loan than those who refinance**. Speak to UNO about which method of refinancing is best for you and if you’re interested in a property value estimate, finding out your total savings over the life of the loan and hearing about the lowest rate home loans from Australia’s top lenders, click below for your free, tailored home loan report. Get your home loan report

How soon can you refinance your mortgage?

To be honest, you can review your mortgage at any time, however be aware that you may have to pay break costs (exit fees) if you have a fixed rate. Break costs are fees charged by lenders when you pay out a fixed rate loan before the fixed rate term has expired. Depending on where you are in the fixed term, the break fees could be anywhere from a few hundred dollars to a few thousand. But, sometimes the savings you’ll make on a loan will negate the break costs. Kaching! UNO can help you work out whether it’s a good idea to refinance at this time and which lenders might suit your financial situation. If you’re on a variable rate, you won’t have to pay any break costs. At one time you did: what used to be called the deferred establishment fee (penalty rate) was abolished by the government in 2011, so now you cannot be charged a penalty if you decide to switch rates while on a variable rate. Start crunching your numbers

Is it bad to refinance?

If you’re refinancing to take cash out, otherwise known as borrowing against the equity in your home, this may be to pay for renovations or a new car, or something else that you want need. And this is totally normal if you’re into that sort of thing. What you should be aware of however, is that by refinancing to take cash out of your home, you’re essentially digging into the money that’s already been paid off your loan – and increasing your loan amount again.

The cons

If you’ve being paying off a 30-year loan term for five years, for example, and make the decision to refinance, once you extract the equity in your home, you may be forced to increase your loan term to 30 years once again. So, if you’re refinancing to pay for a chin lift or that $7000 Balmain leather biker jacket, maybe think twice. No amount of money is going to make you look like Ryan Gosling. Plus, if you continue to withdraw more equity to pay for more things, you may find yourself never paying off the principal part of your loan and will end up working ‘til you die. Not ideal.

The pros

Research commissioned by UNO and conducted by Core Data found those who shop around for a better rate actually pay an average of 30 basis points less on their home loan than those who stick to their current interest rate. AND, these people, unloyal as they are, ultimately end up paying less over the life of the loan – $1,092 per year on a $500,000 mortgage or $32,760 over a 30-year loan (comparing the mean interest rate of 4.27% among mortgage customers who compare their rate every six months with the mean rate of 4.58% among those who never compare using a $500,000 principal and interest loan over a 30-year period.) As our founder, Vincent Turner, says: “Banks don’t always love you back for blind loyalty and not looking over the fence can have a significant cost.”

How much does it cost to refinance a home loan?

It usually doesn’t cost you anything. However, you may have to pay some upfront costs to register the mortgage under the new lender and you may have to pay break costs if you are on a fixed term loan. UNO can help you work out whether it’s worth switching home loans while on a fixed rate – or better to wait ‘til the end of the fixed rate term.

What are today’s mortgage rates?

Interest rates fluctuate in line with the official cash rate set by the Reserve Bank of Australia (RBA), which is used as a basis. When the RBA moves interest rates up, many banks and lenders choose to move their interest rates up too. When the RBA moves interest rates down, many banks and lenders will also drop their rates – although they don’t have to. The other thing to know is that not all rates are available to all people. The rate you can apply for will depend on how much equity you have in your home, your credit score and employment situation, among other things. Because rates change, it’s a good idea to keep an eye on them and see if the rate you’re currently on is still the best one for your situation. Check out our best rates page and UNO’s loanScoreTM to find out what options are available to you. loanScore.unohomeloans.com.au/">Get your loanScore

Which documents are needed to refinance a home mortgage?

When you refinance a home loan, you’ll be expected to provide proof of income (e.g. payslips and bank statements for the current loan) and photo ID. You’ll also need to show you have a good history of making payments (most lenders will want to see at least 6 months of solid payment history). This will also help you qualify for a better rate. You can find more information about how to refinance and the home loan application process here: How to refinance a home loan

How many times can you refinance your mortgage?

There is no limit to how many times you can refinance, although you will face a small impact on your credit score each time you do. Note that enquiring about a loan through UNO doesn’t show up on your credit report. How good is that?!

Can refinancing hurt your credit?

Yes it can. When you apply for any loan, your lender will check your credit score. Having a lender review your credit history shows up in your report as a credit enquiry – however when UNO makes the enquiry to begin with, it will not show up on your credit report. Each new enquiry by a lender can knock a few points off your credit score. That’s why we reckon it pays to find a refinance deal with us – because we can search for the right option from our panel of more than 20 lenders, so you don’t have to shop around making loads of enquiries with every bank in town. Find my refinance ratesBook in a quick call with our customer care team.Book a call in with UNO

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TESTIMONIALS

What our customers are saying

John Cahill
March 7, 2024
Scott Wilkinson was my broker last year when I sought finance for a new property investment and refinance for my property port folio. He was an absolute delight to work with. He was always professional, on time and always available to talk at a moment's notice to discuss my credit options and give well considered advice; usually this was very much after-hours due to my work commitments during the day. He was always happy to talk. I had not used a mortgage broker in a long time opting to do the re-financing myself. This was primarily due to disappointing experiences I'd had with mortgage brokers in the past. However with the increasing complex nature of dealing with credit providers, I could see that I needed a good advocate to act on my behalf for this particular refinance. In all honesty I did not hold much hope that in the current credit environment I would be able to secure the finance I required for the new property investment I was wishing to secure. Scott found a way however and was able to secure the finance along with the refinance of my portfolio. I have since referred friends to Scott and I know they have been very happy with his work. He is ideal for property investors who have busy day-jobs and need someone who understands property investment strategy and is able to tailor credit advice and options to their needs. Scott provides this advice and information in a way that is clear and concise. He kept me up to date continually during the application process. He made what could have been a very stressful and frustrating process easy and straightforward. I could not recommend Scott and the team at UNO Home Loans more highly. They are all a delight.
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Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
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Rod
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
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Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
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Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
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Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
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Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
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Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
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Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
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Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
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Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
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Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
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