Your ultimate guide to refinancing your home loan

Estimated reading time
 5 min

Learn about:

• The different benefits of refinancing, such as better loan rates and features, debt consolidation and cashing out
• Costs you should be aware of before refinancing your home loan
• The type of home loans you can switch to

So, you’ve owned your own home for a while, been around the block a few times and know what’s what.

But maybe interest rates have risen. Or maybe your home no longer suits your lifestyle. Sound familiar? If you’re asking yourself, ‘Should I refinance my loan?’ then it might well be time to make the switch to a smarter loan option.

Refinancing your home loan can take a bit of time and focus but the effort can pay off with a better home loan rate and a healthier wallet. We’ve made a simple guide to ‘everything refinancing’ so all you need to think about is the cash you could save.

What is refinancing?

Excellent question. While most people think of refinancing as switching lenders, this isn’t always the case. Refinancing involves restructuring your home loan , and hopefully saving yourself some serious coin in the process. This often results from securing a better interest rate, and/or better terms, like a new repayment option that aligns with your lifestyle, giving you more flexibility with your money.

Should I refinance my home loan?

Whether you’re looking to free up some cash to invest, or just want to make sure you’re getting the best deal, everyone has a different story to tell. Your need to refinance will depend on your circumstances, but these are the most common reasons people choose to go down the refinancing route:

• To secure a better interest rate - Perhaps your fixed interest term is about to end, or a different loan arrangement will mean less interest in the long term. You can use our home loan repayment calculator to compare which loan will save you the most.
• To access the equity in your home (time to invest!) - The equity in your home is equal to the difference between the amount your home is worth, and how much you have left to pay back on your home loan. Home value minus home loan = equity, simple!
• Your current term is ending – A great time to hunt around for a new home loan rate that better suits your lifestyle.
• To merge your debt into one payment – Make paying your loan and money management simpler.
• To switch providers – This may come down to wanting better service, or perhaps you want to do something your current loan policy won’t allow.

What home loan can you switch to?

When it comes to restructuring your home loan, there are a few loan options you can move to:

• Fixed home loan – This is where rates are locked in for a set period - a good option for those who want certainty and stability with their repayments.
• Variable home loan – Where your interest rate changes along with the economic climate. While this is great news when interest rates are low, you’ll have to be financially ready if they increase.
• Split home loan – These are a great way to get the best of both worlds. How you decide to split your loan rates is entirely up to you – you can do an even 50-50 split or spice it up with a 70-30, whatever works for you and your finances.

When refinancing, you can also change your repayment options depending on what you need, including:

• Principal and interest – This is where you pay back the amount you borrowed from the lender and the interest they charge. You might pay less interest over the life of your loan as you’re paying back the amount you borrowed faster.
• Interest only – This is where you pay off just the interest your lender charges on the amount you borrowed. Your repayments may be lower to begin with, but when the interest only term ends your repayment amount may increase because you’ll have to start paying back the principal.