What are the potential benefits of refinancing?
Refinancing your home loan could help you:
- Save money with a lower interest rate or reduced fees
- Reduce your repayments
- Access equity in your home for a renovation, solar system, investments, or a new car
- Lock repayments in with a fixed rate home loan
- Consolidate several loans.
If you're clear on what you want to achieve with refinancing, it's much easier for you to ask the right questions of banks and other credit providers to choose the loan that best suits your needs.
1. Understand your current financial situation
Spend some time noting down all the things a new lender is likely to want to know, such as your disposable income, liabilities, and ability to make repayments.
Westpac's Mortgage Repayment Calculator helps you estimate how much you could be paying on a new home loan. Or use our affordability calculator to see what you could afford to borrow through refinancing.
It's worth getting your property valued, as any equity you've accrued may have an impact on the outcomes if you switch to a new loan.
2. Compare home loan options, costs and features
It's not just about interest rates. There are many factors for you to consider before refinancing, including immediate and ongoing fees to watch out for. So, here's a guide to some of them.
- Loan options - Most lenders offer a range of home loans, features and offers, including owner occupier loans and investment home loans, basic home loans, standard variable with offset, and fixed interest loans. Make an appointment with a Westpac home loan specialist and they'll talk you through the differences.
- Loan term – If you refinance the same home loan amount for a longer term, your monthly repayments could be lower – but you could pay more interest over time.
- Introductory or honeymoon rate – Will only apply for a fixed period, so make sure it's a good deal in the long term.
- Interest rate – A critical consideration when refinancing your home loan, you can use our refinance calculator to work out potential interest savings if you choose to switch to Westpac.
- Variable interest rate – Your interest rate may change at any time, depending on market conditions.
- Fixed interest rate – This option fixes your rate for a set period, often 1 to 5 years. However, it’s important to note that break fees may apply if you need to make any changes to your loan during this period.
- Comparison rate – Helps you compare one loan with another, factoring in fees and establishment costs, so you know how much you will pay over the life of a loan.
- Service and admin fees – Ongoing fees need to be considered when comparing loan options.
- Break cost – Ask your current lender to quote on any exit fees and early prepayment fees.
- Valuation fee – If your new lender needs to check your property's value, they may arrange for an independent property valuation.
- Home loan repayments – These will be based on the amount owing on your loan, your loan term and the current interest rate. With a longer term, your repayments will be lower, but you'll pay more in interest over time. On a variable home loan, your repayments may change in line with RBA rates. Repayments shouldn't change during a fixed rate period. Most lenders let you make extra repayments that will give you a loan term reduction. And if you choose Principal and Interest repayments, you'll reduce both the interest charged and the amount borrowed (the principal). 1-5 year interest only repayments just count towards interest charges, and don't reduce the principal. This means lower repayments on interest only loans, but potentially higher interest charges over time.
- Offset account – Opting for a home loan with an offset facility could help you reduce the amount of interest you pay by offsetting the funds in a linked everyday account – and therefore the amount of time your home loan takes to pay back.
- Lenders Mortgage Insurance – Depending on the risk associated with your new loan and its loan to value ratio (LVR), your lender may require you to pay Lenders Mortgage Insurance.
3. Choose a lender for your home loan refinance
There are many ways to see who's offering what for your refinancing, such as searching online, contacting lenders directly, or using comparison sites. Much depends on how easy each option is to compare like-for-like, and how much time you want to devote to the research.
Naturally, you'll want to partner with a lender with a good reputation for service, financial stability and reliability – and make sure they have an Australian credit licence.
4. Apply for a new home loan
Your research has hopefully revealed the eligible home loans that suit your plans. Now it's time to put in your application. With Westpac, you can start an application online, go to a branch, or use a mortgage broker. If you’re new to us, prepare to provide information about the following:
- Personal details – You may be required to provide details such as the name, age, address, contact details and two types of ID (Australian driver licence, passport, Medicare card, Australian birth certificate) for each applicant. This is so we know we're dealing with the right person and can contact you easily. Alternatively, we may be able to securely verify your ID online in minutes. We may also need to know how long you've lived at your current and previous addresses.
- Family situation – Including your relationship status and the number of dependents you support, as they may affect your income and expenses.
- Your employer's (and/or accountant's) business and contact details – To confirm that your income is sufficient to repay the loan.
- Earnings – Your current income, with evidence such as pay slips and income tax returns to verify it.
- Expenses – Your current expenses, with evidence of bank statements, copies of bills etc. to verify them.
- Assets – Things of value you own show that you've accumulated wealth over time and may help to repay part or all your loan. These could be property, investments, cars, contents of your home or even collectables. We may ask for supporting documents to check the value of some of these assets.
- Liabilities – Money you owe other people that will need to be paid back now, or in the future. For example, an existing home loan, investment loans, credit cards, a personal or car loan, etc.
- Details of your current loan and property – Enough detail for us to be able to first pay out your existing loan and then transfer the property deeds and mortgage.
Once approved, your new lender should send you a new contract and mortgage documentation. As with any contract involving large sums of money, you may wish to seek professional advice from an independent legal specialist before you sign. Even then, make sure you personally understand any terms and conditions in the document. If you're not sure, ask.
When you've signed the documents, your new lender will usually organise paying out your old lender and transferring the mortgage and any other accounts that were part of your refinancing. Delays from your old lender can affect your loan settlement date.
Once that's all taken care of, you'll receive a welcome kit from your new lender. This sets out the agreed interest rate and repayment terms. Check it's correct, then set up your accounts to start making your new repayments. Congratulations – you've successfully refinanced your home!
