Refinancing your mortgage

Who this suits

People refinance for lots of reasons, and not all of them are about the rate. These are the situations that most often lead to a conversation about moving a mortgage.

• Your fixed term is ending and you would like to see what other lenders do before you roll over.
• You are with a lender whose service, features or loan structure no longer suit you.
• You want to bring a car loan, personal loan or credit card into the mortgage, or split the loan differently.
• Your home has probably gone up in value since you bought and you would like to see how that changes your options.
• A lender has offered a cashback and you want to work out whether it really adds up once any break fee is counted.
• Your household has changed, such as a second income, a career change or a separation, and the loan needs to match.

What a mortgage broker does here

Refinancing means moving your mortgage to a different lender, usually while keeping the same property. A mortgage broker can generally help with each of these stages.

1. 1

   Reading your current loan

   A mortgage broker starts with what you have today: the balance, how much of the term is left, the fixed rate expiry dates on each split and any features such as an offset account. This tells you what moving would change and what it would not. It also shows how much of the loan sits on which rate type, which is what decides what can be moved without a fee and when.

2. 2

   Break fee versus cashback

   Ending a fixed term early can cost a break fee, which reflects how the lender's own funding costs have moved since you fixed. Cashback offers sound simple but often come with a clawback if you leave the new lender within a set period. A mortgage broker adds up both sides, so you can see the whole picture and not just the headline.

3. 3

   Value and LVR

   Lenders look at your loan compared with your home's value, known as the loan to value ratio or LVR. The more equity you have, the more options tend to be open. A mortgage broker can work through what your property may be worth and how lenders are likely to see it. If a lender wants a formal valuation, a mortgage broker can explain what the valuer will look at, and what it could mean for your options if the figure comes back different from what you expected.

4. 4

   Comparing lenders

   The rate is only one part of the picture. A mortgage broker also looks at fees, whether you can make extra repayments, how loan splits work, how a lender treats your kind of income and what the service is like once you are a customer. Features that look similar on paper can behave differently in practice, such as how quickly extra repayments can be redrawn, or whether a split can be changed without a fee.

5. 5

   Application and approval

   The new lender assesses you as if you were a new customer, so it will want identity, income and expense documents again. It may also want a valuation of the property. Who pays for that can depend on the lender and the offer, so it is worth asking. A mortgage broker can also help you explain anything unusual in your statements before a lender asks about it, such as a one off expense or a change of job.

6. 6

   The switch paperwork

   When the new loan is approved, your lawyer or the lender's arrangement pays out the old loan and registers the new mortgage. Timing the switch around the end of a fixed term can avoid a break fee. A mortgage broker keeps an eye on dates and what needs to be signed by when.

7. 7

   After the switch

   Once the new loan is live, a mortgage broker can check that your automatic payments have moved across, that the old loan is closed and that nothing is left behind, such as a credit card or an account still linked to the previous lender. It is also a good moment to put the new fixed term end dates in your calendar, so the next review is on your terms and not a surprise.

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Questions people ask

Will I pay a break fee if I switch?

Only if you end a fixed term early. Moving at the end of a fixed term does not usually bring a break fee. If you are partway through a term, the fee depends on your lender's terms and how rates have moved since you fixed, so your lender can tell you the figure before you decide.

Is a cashback offer worth it?

It depends on the terms. A cashback is often paid on the new loan but can be clawed back if you leave within a set period, and it does not change the rate or the fees over the life of the loan. A mortgage broker can help you weigh the cashback against any break fee and other costs.

Can I refinance if my property has gone down in value?

Sometimes. Lenders look at the loan compared with the value, so less equity usually means fewer options, but it does not rule refinancing out. A mortgage broker or lender can tell you what is possible.

How long does a refinance take?

It depends on the lender, how complete your paperwork is and whether a valuation is needed. A mortgage broker or lender can tell you what they need and roughly how long it usually takes, and can time the switch around your fixed term where that matters.

Can I change my loan structure when I refinance?

Often, yes. Moving lender is a common time to rethink how the loan is split, which terms you want and whether to add borrowing for something else. The new lender will assess you as a new customer, and a mortgage broker can explain the options.