A useful refinance review starts with the existing loan and the result the borrower wants to achieve. A lower advertised rate does not automatically create a better overall outcome.
Define the reason for refinancing
A clear purpose makes comparisons more useful. Common reasons include reviewing repayments, changing loan features, consolidating eligible debts, accessing equity for a defined purpose or adjusting a loan structure.
Consider whether the goal is short term or long term. Extending a loan term can reduce required repayments while increasing the period over which interest may be paid. Debt consolidation can also turn shorter-term debt into debt secured against a home, creating different risks.
Review the existing home loan first
- Current balance, available redraw and repayment amount
- Remaining loan term and original settlement date
- Variable or fixed-rate status and any fixed expiry date
- Offset account, redraw, repayment flexibility and package features
- Annual, monthly or transaction fees
- Security property and any linked or cross-collateralised loans
Ask the current lender for accurate payout or discharge information when required. A statement balance may not be the final amount needed at settlement.
Account for refinancing costs and trade-offs
Potential costs can include discharge fees, government registration charges, application or settlement fees, valuation costs and fixed-rate break costs where applicable. Some offers may include incentives, but an incentive should be assessed alongside the full loan cost and conditions.
Compare more than the repayment
Review the loan amount, term, fees, features and estimated total cost over a meaningful period. If additional funds are borrowed, separate the benefit of the refinance from the effect of increasing the debt.
Property value and available equity
The lender may arrange a valuation to assess the property offered as security. The result can affect the loan-to-value ratio, available options and whether additional costs or conditions apply.
Online estimates are not formal valuations. If the refinance relies on accessing equity, allow for the possibility that the assessed value differs from expectations. Be clear about the purpose of any additional borrowing and the amount actually required.
Documents commonly needed for refinancing
- Identification and current personal details
- Income evidence such as payslips or business financial information
- Transaction, savings and credit account statements
- Statements for the loan being refinanced
- Details of all liabilities, limits and regular expenses
- Rates notice or accurate security property information
- Evidence supporting the purpose of additional funds where requested
Current serviceability requirements apply even when repayment history has been strong. A new lender assesses the application under its current policies and assumptions.
Typical refinancing process
- Clarify the purpose and review the existing loan.
- Calculate likely costs, available equity and the proposed structure.
- Prepare current income, expense, liability and property information.
- Compare suitable options against the intended outcome.
- Submit the application and complete valuation requirements.
- Review approval conditions and sign accepted loan documents.
- Arrange discharge of the existing loan and settlement of the new loan.
- Confirm repayments, offset arrangements and account access after settlement.
When refinancing may not be suitable
Costs, a short remaining loan term, fixed-rate break costs, reduced borrowing capacity, property valuation or the loss of useful features can make a change less beneficial. Sometimes renegotiating the existing loan may be worth exploring before proceeding.
Return to the Home loan guides hub, explore Refinancing support, or contact Gifted Loans.