When Can You Refinance Your Home Loan?
Is there a right or wrong time to refinance your mortgage? Find out when switching home loans could make a difference to your long-term financial goals.
Is there a right or wrong time to refinance your mortgage? Find out when switching home loans could make a difference to your long-term financial goals.
February 2022 – 10 minute read
When considering refinancing a mortgage, there are many questions:
This is why there are several factors you need to consider when you talk about timing and switching loans:
This question is probably one of the most important. If you’ve had a loan for less than 12 months, refinancing may not add up numbers-wise, as the costs associated with refinancing could outweigh the benefits of a lower interest rate. Look out for application and discharge fees, property valuation fees, mortgage registration fees, search title fees, break costs and other fees, or you may potentially have to pay Lenders Mortgage Insurance.
There are many variables at play when you consider the type of loan (fixed rate loan or variable loan), interest and comparison rate, offers, and features offered by lenders. Before you even contact a lender, you need to look at what’s involved in closing out your current mortgage, as that’s where you could get unstuck.
Closing costs that could impact your switch to a new lender:
When you approach a lender or credit provider for a new home loan, they’ll want to assess your ability to repay the loan. That means you’ll need to provide details of your personal and financial situation, proof of income, pay slips and other information to meet their lending criteria. Each lender will have its criteria, but in general, lenders will look for three things, sometimes called the three ‘Ps’ of lending:
As every lender has different criteria, knowing what you could potentially borrow with your latest financial and personal details is essential.
At Westpac, our handy home loan calculators can help you estimate how much you could borrow as well as what your monthly repayments might be:
Your ability to borrow more against your property will depend on three things:
There are several reasons why you might want to increase or ‘top up’ your mortgage:
As long as the property valued has a loan to value ratio (LVR) of 80% or less, you should be able to borrow against the accumulated equity.
No rule says you can’t refinance more than once, but it may not be the most practical thing to do, especially if you consider refinancing costs. However, if you have a good reason to do it, or you have no choice and need to sell your property quickly, it can be done. Be particularly careful if your current home loan is on a fixed interest rate as you could be up for break costs as well.
Yes, it might, especially if you’re applying to multiple lenders in a short period. If you’re refinancing within the same year, don’t apply to several lenders, do your homework and decide which lender you’ll use or approach a local broker. Before considering refinancing, it’s always a good idea to talk to your current lender first. They may be able to meet your expectations without having to refinance, which will mean your credit score stays intact.
Avoid the hassles, paperwork and break costs that may be involved when you refinance with another bank. Give us the chance to help you stay. Call 8am-8pm, Mon-Fri and 9am-6pm, Sat (Sydney time): 1800 807 693 or book an appointment.
Before you make any decisions, you need to be clear on why you want to refinance your home loan. The reasons you’re looking for a new mortgage could be addressed with your current loan by using features that you may not be aware of or changing the way you’ve structured your loan. That’s why before you put in a new home loan application, talk to your current lender and request a review. Keeping your lender means you'll avoid costs and fees such as:
No matter what you decide to do, your lender should encourage you to review your home loan regularly, either when there’s a change in circumstances, interest rate, market trends or if you haven’t reviewed your home loan in over 2 years. A good home loan should have the features and flexibility to change with your ever-changing needs. Features and services that you may want to consider, as your needs change, could include the ability to request a repayment holiday, have a transaction account linked to your loan for scheduling repayments or as an offset account which could reduce interest repayments.
If your lender can meet your current lending expectations, you’ll save on all the hassles and costs of refinancing. The same lender can also give you details about features and services that you may not use to the full potential. They should be able to show you how your loan can change as your future needs change.
Westpac customers can get help by calling 8am-8pm, 7 days a week (Sydney time): 132 558 or can book an appointment.
You don’t necessarily have to refinance your loan if you're buying and selling property. If your loan has a portability feature, it will let you substitute the property held as security against the loan with a different property. Portability benefits mean you avoid the costs associated with a new loan and the need to complete a full application. It’s typically much faster, too, meaning you can keep all the current loan's features like an offset account, interest rate, setups, and structure. There will also be no break costs involved if you have a fixed rate loan and use your portability feature.
Conditions, credit criteria, fees and charges apply. Residential lending is not available for Non-Australian Resident borrowers.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. This includes any tax consequences arising from any promotions for investors and customers should seek independent, professional tax advice on any taxation matters before making a decision based on this information.
Credit provided by Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.