Refinancing your home loan can be a smart way to lower your interest rate, reduce monthly repayments, or access equity for other financial goals. But just like applying for your first mortgage, the refinancing process can feel complex if you’re unsure where to start.
Whether you’re refinancing to get ahead financially or to create more breathing room in your budget, this step-by-step guide will help you approach it with confidence and clarity.
1. Clarify Your Financial Goals
Before jumping into refinancing, take time to define your “why.” Are you aiming to:
- Reduce your monthly repayments?
- Switch from a variable to a fixed rate (or vice versa)?
- Shorten your loan term?
- Access equity for home improvements or debt consolidation?
Having a clear objective will shape the rest of your refinancing strategy and help you compare offers more effectively.
2. Review Your Current Loan
Understanding the terms of your existing mortgage is essential. Check:
- Your current interest rate and repayment amount
- Remaining loan term and balance
- Whether there are exit or break fees
- If your loan has features like redraw or an offset account
This will give you a baseline to evaluate whether refinancing is worthwhile.
3. Check Your Credit Score
Your credit score will influence the interest rate lenders offer. Access your credit report through free services or directly via Equifax, Experian or illion, and look for any errors you might need to dispute. A stronger credit score puts you in a better position to negotiate.
4. Research Interest Rates and Market Trends
Keep an eye on the latest home loan interest rates—especially if the Reserve Bank of Australia has recently adjusted the cash rate. Comparing what’s currently on offer across different lenders gives you insight into what’s realistic and competitive based on your financial profile.
5. Use a Mortgage Refinance Calculator
Crunch the numbers using a refinance calculator to see:
- Your new estimated monthly repayments
- Potential total interest savings
- Your break-even point (how long it takes to recover any refinancing costs)
This is where you can determine if the financial benefits of refinancing outweigh any short-term fees.
6. Prepare Your Documents
Get your paperwork in order early to streamline your application. Most lenders will ask for:
- Payslips or income verification
- Recent tax returns
- Bank statements
- A property valuation
- Details of existing debts or credit cards
Having these ready will make the process faster and less stressful.
7. Compare Lenders and Loan Features
Don’t just look at interest rates—also weigh up:
- Comparison rates
- Loan fees (application, legal, discharge, etc.)
- Loan features like offset accounts, redraw facilities, or extra repayment options
Look beyond your current bank; compare banks, credit unions, and online lenders, or get help from a mortgage broker to shop around.
8. Speak with a Mortgage Broker
A good broker can simplify the process, compare a range of products on your behalf, and help you find a loan that fits your goals. Brokers are especially helpful if your financial situation is a little more complex (e.g., self-employed or recently changed jobs).
9. Review and Understand the Loan Offer
Once you’ve shortlisted a lender, carefully review the loan documents. Double-check:
- The new loan term and repayment structure
- Whether there are any ongoing or hidden fees
- Early repayment or break fees
- Any special offers or conditional discounts
If something’s unclear, ask the lender or your broker for clarification.
10. Lock In Your Rate and Proceed to Settlement
When you’re happy with the offer, lock in the interest rate (especially if rates are rising) and sign the documents to proceed. Your new lender will liaise with your current lender to finalise the switch. Expect to pay settlement and government fees—but remember, these are typically offset by the savings from refinancing.
Final Thoughts
Refinancing isn’t just for reducing repayments—it’s a tool that can help you realign your mortgage with your current lifestyle and financial goals.
Whether you’re aiming to lower your interest rate, switch to a more flexible loan product, or tap into home equity, these first steps can help you approach refinancing with a clear plan. With the right guidance and research, you’ll be on your way to improved cash flow and greater financial freedom.