Refinancing Guide

Refinancing your home loan: compare the full cost

Refinancing means replacing your current home loan with another loan. The right change may reduce your costs or give you features that better suit your plans. A lower advertised rate alone does not tell you whether switching is worthwhile.

Oliey Finance helps borrowers in Cranbourne and Melbourne’s south-east compare their current loan with suitable alternatives, including the costs of switching and the effect of the new loan term.

Start with your current loan

Collect your latest statement, current rate, remaining term, repayment amount and any fixed-rate expiry date. Include your offset balance and the features you actually use. Ask your existing lender whether it can improve your rate before deciding to move.

Work out the cost of switching

Check discharge and application fees, valuation and settlement charges, and any government charges. If your loan is fixed, ask your lender for a current break-cost quote. Check whether the new loan would require lenders mortgage insurance. Include ongoing account or package fees in the comparison.

Compare repayments over the same remaining term

If you have 23 years left on your loan, compare the alternatives over 23 years first. Restarting a 30-year term can lower the scheduled payment while extending the time you remain in debt. Ask for both the repayment difference and the estimated total cost under the stated assumptions.

Calculate a simple break-even point

A basic estimate is switching costs divided by expected monthly savings after ongoing fees.

Illustration: switching costs of $1,800 divided by estimated net savings of $150 per month gives a break-even point of 12 months. This is a simple illustration, not a loan quote. It assumes unchanged savings and excludes the time value of money. Compare the same remaining term and obtain a fuller calculation if balances, fees or rates change.

If you expect to sell or switch again before reaching that point, refinancing may offer little financial benefit.

Decide whether an offset is worth its cost

Compare the rate and fees of a loan with an offset against an otherwise suitable loan without one. Use the average balance you realistically expect to keep in the offset, rather than a temporary high balance. Check whether the offset is full or partial and whether the account has extra charges.

Read our plain-English offset guide for more on how the feature works.

When staying with your lender may make sense

Staying may be worthwhile if your lender offers competitive repricing, switching costs outweigh the likely benefit, or the proposed new loan does not suit your circumstances. A review should consider both staying and switching.

What to discuss with Fran

• Your current balance, rate and remaining loan term.
• Your goals: lower costs, repayment flexibility, a useful offset or a planned property purchase.
• Any expected change in income or expenses.
• The full switching costs and the features you need.

Nurses and other healthcare workers can also read our nurses and midwives guide. For local support, see mortgage broking in Cranbourne.

Book an introductory call

Book a free 30-minute introductory call or call 0409 961 703. We can discuss your goals and what information is needed for a loan review.

Prefer to read first? Request the refinancing guide using the form below.

Further reading: ASIC Moneysmart — switching home loans.

General information only. This page does not consider your personal circumstances. Loan suitability and eligibility require individual assessment. Examples are illustrative and are not guaranteed savings or credit offers.