Refinancing a home loan: frequently asked questions
How much does it cost to refinance in Australia?
Refinancing typically costs $500 to $1,500 in discharge, application and government fees, which are often offset by lender cashback offers. The main exception is break costs on a fixed loan, which can amount to thousands of dollars. It is advisable to obtain a break-cost quote from the current lender before committing.
How is the value of refinancing assessed?
The key measure is the break-even point: total switching costs divided by the monthly saving. If switching costs $1,000 and saves $250 a month, the costs are recovered after four months, and every month beyond that is a net saving. The refinance calculator performs this calculation.
Does refinancing affect a credit score?
Each application creates a hard enquiry, which lowers the score slightly for a short period. One considered refinance every two years or so is normal, and the score recovers quickly. Multiple applications to many lenders within one month cause greater harm. This is a further reason to have a broker place the application accurately the first time.
Is refinancing possible if the property has fallen in value?
If equity has fallen below 20%, LMI may be payable again, which usually removes the financial benefit. Options remain available: repricing with the current lender costs nothing and often recovers most of the difference. It is worth enquiring before ruling it out.
How often can a home loan be refinanced?
A loan can be refinanced as often as it is financially worthwhile, although each switch involves costs and a credit enquiry. A practical approach for most borrowers is to reprice with the current lender yearly, which requires one phone call, and to review the market thoroughly every two to three years or when a fixed term ends.