page top

When is the right time to refinance your home loan?

Attention: open in a new window. Print

Refinancing your home loan

If you’re a homeowner, it’s a smart idea to periodically review your service providers to make sure you’re still getting the best deal. Comparing your water, power, internet, home and contents insurance, etc. against competitors can save you hundreds of dollars a year. And your mortgage should be no different.

In fact, reviewing and refinancing your mortgage at today’s record-low rates could save you thousands of dollars a year in interest, and tens of thousands of dollars over the course of your loan.

Why now is a great time to consider refinancing

In March 2020, the Reserve Bank of Australia (RBA) set the interest rate at just 0.25% - the lowest in history. This was intended to stimulate the economy by reducing the cost of borrowing, thereby increasing the flow of money. 

When it comes to mortgages, this means that interest rates may be significantly lower than they were when you took out your home loan. Refinancing can mean you save money on interest and pay off your loan faster.

In fact, the interest rate on our award-winning fixed rate home loan is currently 2.29%* pa (2.82%^ comparison rate) when fixed for three years. To see how that could affect your monthly repayments, try our home loan repayment calculator

Who can refinancing be suitable for?

Refinancing isn’t necessarily suitable for everyone, but it may be right for you if:

1. Your interest rate isn’t competitive

This is an obvious one - if your current interest rate is no longer competitive then you may be able to take advantage of the current lower rates.

2. You’re coming to the end of a fixed-term

When you first apply for a home loan, you may have been offered an enticing introductory interest rate for a set period of time. Once this fixed-term is over, you may rollover onto a standard variable rate, which may not be as competitive. 

 3. You have multiple debts

If you have multiple debt repayments, consolidating them into one loan could make them easier to manage and repay. Rolling them together is known as ‘debt consolidation’ and can be used to turn short-term, high-interest debt like credit cards into longer-term, lower interest debts which can make them easier to manage and pay off.

Things to consider when refinancing

There are many factors to think about when deciding if refinancing might be right for you, including:

1. Your situation 

It’s always important to conduct a personal audit of your finances to make sure you know exactly where you currently stand. Are there factors or events coming up that could impact or change your current situation? 

 2. Costs and fees associated with refinancing

As well as new fees that may be charged when applying for a new loan, there are two further costs that you may need to consider when refinancing, depending on how old your home loan is and how it’s structured.

If you took your home loan out before 1 July 2011, you could be charged an ‘exit fee’. The exit fee was intended to cover the cost of lost interest earnings to the bank over the remainder of the loan period and was either a fixed fee or calculated according to the outstanding loan amount. Exit fees were banned in 2011, but if your mortgage is older than this then it’s a good idea to check your mortgage agreement to see if an exit fee forms part of the conditions and, if so, how much you will be charged.

If you currently have a fixed rate home loan and would like to refinance or make additional repayments, then you may be charged a ‘break fee’.  When credit providers lend money at a fixed interest rate, they generally enter into a contract with a third party to lock in their funding costs for the same period. If the borrower breaks their loan during the fixed period or makes extra repayments, and wholesale interest rates change, the credit provider can make a loss. Break fees generally represent the cost of this loss.

 3. Looking beyond just rates and fees

A popular benefit of refinancing is the ability to access a lower interest rate, but it’s important to ensure that the home loan still has the features that you need.

Packaged home loans generally offer additional benefits like interest rate discounts, credit card fee waivers, insurance discounts and, sometimes, rewards points, .

Even fixed home loans can offer different amounts of flexibility. For example, our fixed rate home loan allows borrowers to make up to $10,000 of extra repayments a year, so you can pay it off more quickly if you want.

 4. Your desire to lock in the current low rate

For homeowners who want to lock in current low interest rates, refinancing with a fixed rate loan could be a good way to safeguard yourself against future interest rate rises.

5. Calculate what your repayments could be

If you’d like to see what your monthly repayments could be using our Fixed Rate Home Loan then click through to our mortgage repayment calculator and input your current loan amount to see the difference.

We’re not the only ones who think it’s worth checking out our refinancing options – Canstar recognised Qudos Bank as a 5 star ‘Outstanding value’ fixed home lender, RateCity gave our Fixed 5 year home loan the coveted Gold award and Mozo bestowed four awards on us, including the ‘Experts choice’ for the best fixed rate home loan. Visit our Fixed Rate Home Loan page to find out more about the $0 bank fees, 90 day rate guarantee (Ts & Cs and fees apply), ability to split with our lowest variable rate, and flexible features like extra repayments up to $10,000 a year, all available over 1, 2, 3, 4 and 5 year terms.

 

  Disclaimer:

Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305. The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

* Rate based on applications for new owner-occupied home loans for established homes over $150,000 fixed for 3 years, with a deposit of 20% or more with principal and interest repayments received from 21 July 2020. Fixed rate may change prior to funding. On expiration of the fixed rate period, the interest rate reverts to a variable rate currently 2.99% for Owner Occupier and 3.29% for Investment home loans.

^# WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate assumes a loan for an owner-occupied established home of $150,000 fixed for 3 years, monthly repayment frequency, a term of 25 years, a 20% or more deposit with principal and interest repayments.

Before opening an account with us, you should read our Terms and Conditions for Savings Accounts and Payment Services and Financial Services Guide

Rates current as at 21 July 2020.

Article published August 2020