Guide / Refinance
Questions to ask before you refinance.
A new rate can be appealing. Compare the whole loan and the cost of making the change.
Before refinancing, compare the total cost of the new loan with the cost of keeping your current one. Include fees, any break costs, loan term and the features you will use.
What will switching cost?
Ask your current lender whether it can improve your existing deal. Then list the costs of leaving and entering a new loan. ASIC MoneySmart highlights possible fixed rate break costs, discharge fees, application fees and other charges. Depending on the loan and equity position, lenders mortgage insurance may also matter.
Compare these costs with potential savings over the period you expect to keep the loan. MoneySmart's mortgage switching calculator can help you explore the trade-off, but its results are estimates.
Will the new term change the total cost?
A lower monthly repayment can come from spreading the loan over more years. Ask for the total interest and fees over comparable loan terms, not just the first repayment. Also compare the features that matter to you, such as offset, redraw and flexibility to make extra repayments.
- How long will it take for any savings to cover switching costs?
- Will the new loan term be longer than the years left on your current loan?
- What happens when an introductory or fixed rate period ends?
- Do the features fit how you actually use your home loan?
Sources and further reading
Refinancing suitability, fees, savings and eligibility depend on your current and proposed loans and credit assessment.