Refinancing
Refinancing means moving your home loan to a new lender, or restructuring it with the one you have. It can save real money, but only if the numbers work once costs are counted.
By Yatin Kainth, Financial Adviser. Last reviewed
Switching banks usually makes sense when your fixed rate is ending and another lender offers a lower rate, better loan structure or a cash contribution that outweighs the costs. Before you move, check for break fees on any fixed portion and whether your current bank will claw back a cashback if you leave early.
Usually when a fixed term is ending. You can move floating money any time, but breaking a fixed rate early can mean a break fee. Start looking about six weeks before your fixed term finishes. That gives time to compare offers, get approval and let the lawyers handle the switch.
Other good reasons to review: your income has gone up, the house has risen in value so you’re now over 20% equity, you want to consolidate debt, or you need to borrow for renovations.
| Cost | When it applies | How to handle it |
|---|---|---|
| Break fee | Leaving a fixed rate before it ends, if rates have fallen | Time the move for the end of the fixed term, or check whether the saving still beats the fee |
| Cashback clawback | Leaving within the period your current bank’s cash contribution required you to stay | Check your loan documents for the date the clawback ends |
| Legal fees | Almost always, to discharge one mortgage and register another | Many new lenders contribute cash that covers this |
| Discharge and account fees | Some lenders charge small admin fees | Ask both banks for a full list |
Lenders have to keep their fees reasonable under consumer credit law, and they must be able to explain how a break fee was worked out.
They can be, but they come with a string attached. If you refinance again within the minimum period, the bank can ask for some or all of the money back. I look at the cashback, the rate and the loan features together, not in isolation. A good rate with the right structure often beats a larger cashback over a few years.
It’s worth asking. Banks often have a retention team with better rates than they advertise. But matching the rate doesn’t fix a poor loan structure, and many people are in the wrong split of fixed terms for how they want to repay. Read how to choose the best bank for your home loan, or see my refinancing service.
Often, yes, if the saving over your fixed term is bigger than the costs of moving. On a large loan, even a small rate difference adds up quickly. Get the break fee and legal costs in writing first.
You may have to repay some or all of it if you leave within the minimum period in your loan contract. That period varies by lender, so check your documents.
Usually, yes, although the lender choice may be narrower. See self-employed home loans and bad credit options.
Often a few weeks from application to settlement. The lawyers need time to discharge the old mortgage and register the new one, so start well before your fixed term ends.