Make your home loan work better.

What is home loan refinancing?

Home loan refinancing means changing your existing mortgage, either with your current lender or a new lender. Borrowers commonly refinance to seek a lower interest rate, reduce fees, access equity, improve loan features or restructure debt. Whether refinancing is worthwhile depends on the total cost and your individual circumstances.

Loan Location helps homeowners across Melbourne, including Keilor East and surrounding suburbs, review their existing home loans and compare refinancing options.

Refinancing is about more than chasing a lower rate

A lower interest rate can be valuable, but it is only one part of a refinance decision. The real question is whether the new arrangement leaves you in a better position after fees, loan features, repayment structure and the remaining term are considered.

Sometimes the best outcome is to change lender. In other cases, your current lender may offer a competitive rate or a more suitable product. Occasionally, the numbers show that staying where you are makes more sense.

1. What is home loan refinancing?

Home loan refinancing means replacing, changing or restructuring an existing mortgage.

You may refinance by moving the loan to another lender. You may also remain with the current lender and negotiate a different rate, switch products, change the loan term or create a new loan structure.

Refinancing may involve:

• Moving your mortgage to another lender.
• Negotiating a more competitive rate with your current lender.
• Changing from one home loan product to another.
• Adding an offset account or improving existing loan features.
• Changing between fixed, variable or split lending.
• Changing the remaining loan term.
• Accessing usable equity.
• Consolidating eligible debts.
• Restructuring owner-occupied or investment lending.
• Removing a borrower or guarantor, subject to approval.

2. Why do homeowners refinance their home loans?

People refinance for many different reasons. A lower rate may be the starting point, but it is not the only reason to review a loan.

3. Different types of home loan refinancing

Refinancing can take several forms. Therefore, the right pathway depends on what you are actually trying to achieve.

Rate refinance

This focuses on reducing the interest rate or improving the overall cost of the mortgage.

Feature refinance

This may add an offset account, improve redraw access, change loan splits or provide more repayment flexibility.

Equity refinance

This involves increasing the loan to access usable equity for an approved purpose. The lender must still accept the property value, loan-to-value ratio, purpose and serviceability.

Debt consolidation refinance

Eligible personal debts may be combined with the mortgage. This can reduce the immediate repayment, but it can also spread short-term debt over a much longer period.

Investment refinance

Property investors may review rates, interest-only periods, loan splits, equity access, cash flow and the separation of private and investment debt.

Life-change refinance

A refinance may help when removing a former partner, releasing a guarantor, changing how a property is used or preparing for a major change in household finances.

4. When is it worth refinancing a home loan?

A home loan review may be useful when:

• Your interest rate no longer appears competitive.
• Your loan has not been reviewed for a year or more.
• Your fixed-rate period is approaching its end.
• Your property may have increased in value.
• Your income or financial position has improved.
• You want an offset account or different loan features.
• You are planning renovations.
• You want to purchase another property.
• You are considering debt consolidation.
• You want to remove a guarantor.
• You need to remove or add a borrower.
• Your investment loan structure no longer suits your plans.
• Your current lender cannot provide the structure you need.

Reviewing a loan does not commit you to changing it. The review may show that your current lender remains suitable, that an internal change is enough or that refinancing elsewhere provides a stronger result.

It can also help to understand why existing borrowers may still be paying more than new customers, particularly when lenders are competing aggressively for new business.

5. When might home loan refinancing not be worthwhile?

Refinancing can look attractive on the surface while producing little or no real benefit.

Staying with the existing loan may make more sense where:

• The rate saving is very small.
• The loan balance is already low.
• Only a short loan term remains.
• You plan to sell the property soon.
• Switching costs exceed the expected benefit.
• A fixed-rate break cost applies.
• The new loan would require lender’s mortgage insurance.
• The new loan carries higher ongoing fees.
• You would lose valuable loan features.
• The main repayment reduction comes from restarting the loan over 30 years.
• Your current lender offers a competitive retention arrangement.

6. What does it cost to refinance a home loan?

A lower rate needs to recover the cost of changing loans before it produces a genuine saving.

Potential refinance costs may include:

• Existing lender discharge fees.
• Government mortgage discharge and registration fees.
• Application or establishment fees.
• Settlement or legal fees.
• Valuation fees.
• Annual package or account fees.
• Fixed-rate break costs.
• Lender’s mortgage insurance or a low-equity fee.
• Costs connected with title changes or legal work.

A useful comparison should calculate the break-even point: how long the ongoing savings may take to recover the upfront cost.

7. Be careful when restarting the loan term

A new lender may offer a fresh 30-year loan term even where the current mortgage has far fewer years remaining.

Extending the term may reduce the required monthly repayment. However, it can also keep the borrower in debt longer and increase the total interest paid.

For example, a borrower with 22 years remaining may see a noticeably lower repayment when the debt is spread over 30 years. Part of that reduction comes from repaying the loan over an extra eight years rather than from the lower rate alone.

A proper refinance comparison should show:

• The new loan over the existing remaining term.
• The new loan over the proposed longer term.
• The effect of keeping the current repayment amount.
• The expected total interest.
• How the loan fits with retirement plans.

8. How much equity do you need to refinance?

Equity is the difference between the property value and the debt secured against it.

The lender will calculate a loan-to-value ratio using its own property valuation. The lower the LVR, the more lender and pricing options may be available.

Refinancing above 80% LVR may still be possible. However, it may involve:

• Lender’s mortgage insurance.
• A low-equity fee or premium.
• Higher interest rates.
• Fewer suitable lenders.
• Stricter credit assessment.
• Reduced cash-out options.

A previous LMI premium usually does not transfer to the new lender. Therefore, borrowers refinancing at a high LVR need to compare the new premium with the likely benefit.

9. Refinancing is still a new loan application

Even when the new loan has a lower interest rate, the lender must assess the application.

The lender may review:

• Income and employment.
• Living expenses.
• Credit-card limits.
• Personal loans and vehicle finance.
• HECS or HELP debt.
• Other mortgages.
• Dependants and household commitments.
• Credit history.
• Mortgage repayment conduct.
• Property value and loan-to-value ratio.
• The purpose of any additional borrowing.

A borrower who has made every repayment on time may still find that a new lender assesses their position differently. Lender policy and serviceability calculations vary.

10. How the home loan refinancing process works

11. What documents do you need to refinance?

Document requirements vary by lender and borrower. Common documents include:

• Identification.
• Recent payslips or other income evidence.
• Tax returns and financial statements for self-employed borrowers.
• Existing home loan statements.
• Statements for credit cards, personal loans and vehicle finance.
• Evidence of rental income.
• Living expense information.
• Council rates or property information.
• Evidence supporting the purpose of any additional borrowing.

Providing complete and current documents can reduce delays and help the lender assess the application properly.

12. Questions to ask before refinancing

• What is my current interest rate and remaining loan term?
• Can my current lender offer a better arrangement?
• What will it cost to leave the existing lender?
• Does a fixed-rate break cost apply?
• Will I need to pay LMI again?
• What is the break-even point?
• Will the proposed loan restart the term?
• Does the loan include the features I actually need?
• How does the new offset account work?
• Will any debt consolidation amount have a shorter repayment strategy?
• How will the refinance affect future property plans?
• Does the new structure separate private and investment debt correctly?
• Am I genuinely better off after all costs?

Home loan refinancing FAQs

Do I need to change banks to refinance?

No. You may negotiate or restructure with your current lender. However, the internal offer should still be compared with suitable alternatives.

Can I refinance while on a fixed rate?

Potentially. A fixed-rate break cost may apply, so the cost needs to be confirmed before proceeding.

Can I refinance with less than 20% equity?

Potentially. LMI, low-equity fees, restricted lender choice or higher pricing may apply.

Can I refinance to renovate?

Potentially. The most suitable structure depends on the cost and type of renovation, available equity and serviceability.

Can I refinance to buy another property?

Potentially. Usable equity may contribute towards a deposit and purchase costs, subject to lender approval and borrowing capacity.

Can I refinance to consolidate debt?

Potentially. The immediate repayment may fall, but the long-term interest cost and the risk of securing other debts against the home must be considered.

Does refinancing affect my credit report?

A refinance application generally creates a credit enquiry. A properly targeted application is different from lodging several speculative applications.

How long does refinancing take?

Timing varies according to the lender, valuation, documents, complexity, discharge process and settlement requirements.

Is refinancing always worth it?

No. The costs, remaining term, features, property value, serviceability and expected savings all need to be considered.

The bottom line

Refinancing can reduce costs, improve loan features, release usable equity or create a structure that better supports your plans.

However, changing lender is not automatically the right answer. A proper review should compare the cost of staying, negotiating, restructuring and switching.

It should also consider the remaining loan term, fees, property value, serviceability, offset arrangements and the long-term effect on your mortgage.

Ready to review your home loan?

If you are considering home loan refinancing in Melbourne, Loan Location can review your current rate, repayments, loan term, features, equity position and future plans.

We can then compare whether it makes sense to stay with your current lender, restructure the loan or refinance elsewhere.

Note: This is general information only and does not take into account your personal objectives, financial situation or needs. Lending criteria, rates, fees and product availability can change. Approval is subject to lender assessment. Tax and legal matters should be discussed with an appropriately qualified adviser.