Refinancing Your Home Loan: Is It Time for a Money Makeover?
Refinancing might sound a bit technical, but at its core, it’s just about getting a better deal on your home loan. Think of it like switching to a new phone plan - except you’re potentially saving thousands. With interest rates and personal goals constantly shifting, now might be the perfect time to give your mortgage a glow-up.
How Does Refinancing Work?
Refinancing is basically replacing your current home loan with a new one - hopefully with better features and lower running costs. Here's how it usually plays out:
- Crunch the Numbers: Look at your current loan and compare it with other offers. Are you paying too much interest? Could you shorten your term or unlock equity for other goals?
- Apply for the New Loan: Once you’ve picked a winner, it’s time to apply. You’ll need to provide some paperwork (pay slips, ID, and details about your property).
- Settle the Old Loan: Your shiny new loan pays off the old one, and just like that, you’re on to bigger and better things.
What Does Refinancing Cost?
An unavoidable truth we have all learnt is that nothing in life is free. Refinancing can come with a few upfront costs, but long-term it can save you thousands. Here are the usual fees you’ll be dealing with (remember, thousands):
- Application or Establishment Fee: The cost of applying for your new loan.
- Property Valuation Fee: This covers an updated valuation of your property, so the lender knows what it’s worth. MOVE Bank includes one free valuation in the establishment fee (up to $205)
- Legal and Discharge Fees: Paid to your current lender for wrapping up your old loan and registering the new one.
- Lenders Mortgage Insurance (LMI): If you’re borrowing more than 80% of your property’s value, you may need to pay this.
It’s important to crunch the numbers and figure out your break-even point - the time it takes for your monthly savings to cover the refinancing costs. For example, if refinancing costs $3,000 and you’re saving $150 a month, you’ll recoup the costs in 20 months. After that, you’re just saving.
What Can Refinancing Save You?
This is the fun part: figuring out how much you could save. Here’s what refinancing can do for you:
- Lower Interest Rates: A lower rate can mean smaller monthly payments and big savings over the life of the loan. For instance, dropping from 6% to 4% on a $400,000 loan could save you around $8,000 a year!
- Shorter Loan Term: Refinancing to a shorter term might increase your monthly payments but can save you a ton on interest in the long run.
- Access Equity: Want to renovate, consolidate debt, or take that holiday? Refinancing can unlock some of your home’s equity to make it happen.
When Should You Refinance?
Refinancing isn’t a one-size-fits-all solution. Here’s when it might make sense:
- Your Interest Rate Feels High: If your current rate is above market average, it’s worth shopping around.
- You’ve Had the Loan for a While: If you’ve been with the same lender for years, you might be missing out on newer, better deals.
- Your Financial Goals Have Changed: Maybe you’re planning a reno, or you’d like to pay off your mortgage faster - refinancing can help with that.
Refinancing with MOVE Bank
At MOVE Bank, we keep the refinancing process simple, because let’s face it - life’s complicated enough already. Whether you’re after a lower rate, shorter term, or flexible loan features like an offset account, we’ve got you covered. Plus, our lending specialists are always here to help you every step of the way.
The Bottom Line
Refinancing your home loan is like giving your finances a fresh start. It’s not just about saving money (though that’s a big part of it); it’s about making your loan work better for you and your goals.
If you’re curious about what refinancing could do for you, reach out to MOVE Bank today. We’ll help you figure out if it’s time for a mortgage makeover that puts more money back in your pocket.
Here’s to smarter loans and bigger savings in 2025!
Did You Know?
Did you know that over a 25-year loan of $500k, a 0.60% difference in your interest rate could save you approximately $55,000 over the lifetime of the loan.
Our Big 4 comparison tool can help you visualise the savings you could make with MOVE Bank.
Try it today at movebank.com.au/compare
The images shown are for illustration purposes only and may not be an exact representation of the comparison tool or results. Image based on comparing the Everyday Variable Home Loan to similar products on 18/12/24.
This article is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651
