Last Updated: 31st May, 2021

Refinancing is the procedure of replacing your existing loan with a competitive interest rate.  Refinancing your home loan can lead you to save costs by getting a lower interest rate. But when is actually the right time to refinance? The best time to refinance will depend on your personal and financial situation, so there is no ‘one size fits all’ advice. To figure out and compare rates/fees from different lenders, use our refinance calculator to determine if refinance will be fruitful to your needs.  The calculator can help you figure out how much switching between the lenders can save you.  

Is it the right time to refinance during COVID-19?

If the current COVID-19 pandemic in Australia and the rest of the world has made you wonder about the state of your finances, you are not alone. Due to the series of natural tragedies, you might be thinking that you should hold on to your cash tighter than before. While cutting corners in your living expenses is helpful to you refinancing your mortgage could be an effective way to release some cash and get a better competitive rate at this time. For months in row, Reserve Bank of Australia (RBA) has held the official cash rate by 25 basis points to a historic low, home loan rates have become more competitive than ever.

When is the best time to refinance?

The best time to refinance will heavily depend on what you hope to achieve from refinancing. You should also think about the long-term impacts of changing your lending terms because you make the final decision.   Generally, the following scenarios may suggest the best time to refinance your mortgage:   
  • Refinance to pay less interest

If you wish to take advantage of a lower interest rate from another lender to reduce repayments then you should opt for refinancing. It could potentially save you a lot of money in the long term. Saving money is often one of the biggest benefits of refinancing. The following example shows the difference before refinancing and after refinancing.
Home Loan (30 year term) Interest Rates Monthly Payment
$400,000 4.34% (existing interest rate on your mortgage) $1,989
$400,000 2.49% (after refinancing with competitive interest rate) $1,578
  • Refinance to switch to a better lender

Some lenders fail to stay on top of the market by introducing better policies and user experience. You will find another lender who can provide you with competitive interest rates, shorter terms and a better customer experience. If  your lender lacks various features such as offset accounts, unlimited payments, redraw etc. you might need to refinance to a lender that cares about providing facilities to customers.  
  • Refinance for debt consolidation

When you want to consolidate your debt. This can help you to meet your debt payments if all your debts are managed into a single one instead of several.   
  • Refinance to change loan type

You will have to pay hefty break costs while you transition from a fixed loan term to variable or split-rate loan.  With split-rate loan, you can maximize your advantage of a low variable rate while still maintaining the security of a fixed rate if you choose to do a split-rate loan. It is important to check whether the refinancing will incur exit fees and whether the new loan has all the features of your existing home loan. While refinancing your home loan, you may need to pay Lender’s Mortgage Insurance (LMI) if you’re borrowing over 80% of the property value. If refinancing your loan means you will need to pay LMI charges again, it may not be worth refinancing.  
  • Refinance to access equity

Your home is likely one of the most valuable asset you will ever own. Refinancing to access your equity will allow you to use the funds to invest in property renovation and increase the worth of your home. Note that all lenders have cash out restrictions when it comes to refinancing for home equity.  
  • Refinance to shorten the loan term

You can shorten loan term by refinancing to decrease the interest rate charged to you while at the same time helping you pay off your loan faster. If the interest rates fall drastically, homeowners can refinance existing loans with another one without much change in the monthly payment but with one that has a shorter term.  For example a 30-year fixed-rate mortgage on a $100,000 home loan, can be cut in half to while refinancing from 9% to 5.5% with a slight increase in monthly payment from $804.62 to $817.08.  You’ll save a bundle of interest cost by killing off half of the years of your mortgage loan term, and you’ll more than recover the slight increase in repayments as time goes on.  
  • Refinance to take advantage of refinance rebates

Refinance rebates offers involve a bank or other kind of lender offering you an incentive for choosing one of its products. It can be taken out of the fees you’d otherwise be charged or you may receive it as cash. You can benefit from the competition between banks by refinancing to a lender that has a competitive cashback offer. Learn more about this in our refinance rebate page.  

Should I take help from a Mortgage Broker to refinance?

If you decide to refinance, working with a broker has advantages instead of going straight to a lender. Mortgage brokers are very familiar with the rate changes. Hence, they would be able to evaluate if your loan is maintaining its competitiveness or if it’s time to re-negotiate or shift lenders. At Home Loan Experts, our mortgage brokers can help you with refinancing your home loan as we:  
  • Have access to over 40 lenders

We assess your situation and connect you to the right lender who can approve the loan.  We try to ensure that refinancing to a new home loan product will be able to suit your long-term financial capacity, and your property goals. If there’s a better opportunity for you, we make sure that you’re able to access it.  
  • Understand your situation

We evaluate your financial situation, your income, any other existing debts and any assets you own. While refinancing, the current value of the property is also taken into consideration, so we will have access to the data that indicates what your property is likely to be worth. We will then review the various loan options and figure out whether it’s worth it for you to refinance.  In some cases, we can tell if getting a lower interest rate from your current lender can be achieved without refinancing.  

Talk to a mortgage broker

Please call us on 1300 889 743 or enquire online to talk to one of our specialist mortgage brokers to go over your options for refinancing.