How much does it cost to refinance a home loan?
What happens when you refinance a home loan?
Refinancing a home loan is leaving the deal you currently have and moving the outstanding balance of your mortgage to another product.
The aim of moving is to switch the balance to a lower interest rate or to a mortgage with more features so that you’re spending less and/or happier with your home loan. Or you might be consolidating other debts into your mortgage.
You can refinance your mortgage internally, which is when you stay with your current provider but change the product, or you can migrate to another provider entirely.
Is it a good idea to refinance a home loan?
You can even take the InfoChoice Rate Dare and compare your big four home loan rate with the best rates in the market at InfoChoice. If we can’t find you a better rate, we’ll give you $1,000 (terms and conditions)!
Moving to a rate that’s only a fraction of a per cent lower can still make a big difference over the years, especially if you’re towards the beginning of your mortgage. There may be fees to pay, but if, after using a refinancing home loan calculator, you see that they’re outweighed by the savings you’ll make, then they’re worth it.
Refinancing case study:
Suzy and Dennis are currently paying 3.1 per cent p.a. on a 25–year home loan with an outstanding balance of $300,000. The monthly payments for $1,438 a month.
Suzy finds a new deal for 2.4 per cent p.a. and they switch to a new loan.
The new monthly repayments are $1,415 month, which over 23 years represents a total saving in interest of more than $40,000.
The refinancing fees are around $1,000 and are dwarfed by the total savings.
Three great home loan rates for refinancers
Athena Home Loans specialise in home loans for refinancers only. Athena currently have rates for owner-occupiers starting at 2.59% pa (comparison rate 2.55% pa) and rates for investors starting at 2.99% pa (comparison rate 2.95% pa).
Go direct to Athena Home Loans interest rates and fees information at InfoChoice.
UBank are an online-only bank brand owned by National Australia Bank.
UBank currently have rates for owner-occupiers starting at 2.99% pa (comparison rate 2.99% pa) for loans over $200K and rates for investors starting at 2.84% pa (comparison rate 3.95% pa) fixed for two years.
Go direct to UBank home loan interest rates and fees information at InfoChoice.
Well Home Loans’ Well Balanced home loan has rates for owner-occupiers starting at 2.47% pa (comparison rate 2.50% pa) for loans from $200,000 to $2m, and rates for investors starting at 2.82% pa (comparison rate 2.85% pa) on LVRs up to 90%.
Go direct to Well Home Loans interest rates and fees information at InfoChoice.
Compare home loans from 99 banks and other lenders at InfoChoice.
What are refinancing and early exit fees?
Each individual loan has its own terms and conditions, but the fee structure for refinancing or early repayments are broadly similar.
Government reforms in recent years mean that lenders are not allowed you to charge you more than their costs for exiting a mortgage. That means home loan exit fees are usually hundreds, rather than thousands of dollars in Australia.
Because of government reforms in recent years, big early exit fees apply only to mortgages taken out before 1 July 2011 and to fixed rate home loans.
These fees are also referred to as early discharge or early termination fees and your lender can’t charge any more than they’d lose due to your early termination. Some lenders have decided to waive these fees anyway, and sometimes your new provider will absorb them when you migrate over.
The break fees
These fees might apply when you have a fixed rate mortgage and you refinance to another provider before the end of the fixed term.
The application fees
If you’re migrating to a new lender then they might charge an application fee. These fees are usually around the $150 mark but can go up to $500 or more.