- Use actual fees and monthly savings to calculate your break even; some switching scenarios recover costs in as little as five months.
- Include discharge, setup, registration, and fixed rate break fees; below 20% equity, a new lender may charge LMI that outweighs interest savings.
- Compare loans using the same remaining term and repayment frequency, include every fee and LMI, and keep repayments unchanged to reduce total interest.
- Borrowers who comfortably meet current repayments can still fail a new lender’s affordability test because APRA expects banks to apply a minimum serviceability buffer.
- Allow roughly one to two months for approval and settlement, keep paying the old loan until written confirmation, then relink offset and redraw facilities.
Does refinancing always save you money?
No. A lower interest rate could reduce your repayments, but switching fees, changes to loan features or a longer loan term could leave you paying more overall. As Moneysmart explains, the benefits need to outweigh the costs.
Start by comparing your current loan with similar options. The Bheja Home Loan Health Check can show where your rate stands. If you find a competitive alternative, ask your current lender whether it can offer a better deal before working out whether switching is worthwhile.
How much could you save by switching home loans?
Variable interest rates offered by lenders can differ. This variation means that borrowers who remain on older loan rates may end up paying more than those securing newer loans. In certain cases, the expenses involved in switching loans can be recovered within a few months, making it a financially viable option to explore for some.
There are many reasons why somebody may choose to refinance their home loan. But if securing a lower rate is the main reason for refinancing, the payback period is an important number to consider. It is the time it takes for your monthly saving to cover the one-off costs of moving, such as discharge and application fees. A lender advertising the lowest rate in the market may not be a bargain if its fees take years to recoup.
What should you check before you switch?
Before refinancing, ask your current lender whether it can offer a better rate. A rate reduction on your existing loan may avoid switching costs. Compare any offer with the alternatives, including:
Government charges may also apply to discharge and register mortgages. Ask for a full breakdown of the costs relevant to your property.
Before you call, have your current rate, loan balance, remaining term and details of a comparable competitor offer ready. Here’s a simple question you may ask: “What is the best rate can you offer on my existing loan, and would any fees or features change?”
How do you compare options using the payback test?
A lower rate may reduce your repayments, but how long would it take to recover the switching costs? This is your break-even period.
Say refinancing would reduce your monthly repayments by $150, keeping the same loan amount and remaining term. If switching costs total $1,200:
Break-even period = $1,200 Ă· $150 = 8 months
In this example, you would break even on the upfront costs after about eight months of lower repayments. If the upfront costs were higher, it would have taken longer to recoup the costs. You can use the Bheja refinance calculator to compare your own figures.
Should you use your bank, a broker or go direct?
It’s generally simpler to start with your current lender, especially if the gap to the market is small. A rate match costs nothing and takes a phone call. You may consider switching lenders when the gap is wide, or when your bank will not budge and you can get a better deal elsewhere.
Whether you choose to approach a bank directly or through a broker is a personal choice. Both options have their pros and cons. In general, a bank will only offer you its own products while brokers arrange loans across multiple lenders and must act in your best interests.
What does switching involve and how long does it take?
Switching lenders usually takes several weeks. A straightforward refinance may take around four to six weeks from application to settlement, but missing documents, valuations or discharge delays can extend the process. Ask your lender or broker for an estimate based on your application.
The usual steps are:
- Gather your documents. These typically include identification, proof of income, details of expenses and debts, and current home loan statements.
- Compare the numbers. Check rates, fees and features, then calculate how long it would take to break even on switching costs.
- Ask your current lender for a better offer. Compare its response with the alternatives.
- Apply directly or through a broker. The new lender will assess your finances and may arrange a property valuation.
- Arrange the discharge and settlement. Once approval and loan documents are in place, the lenders coordinate paying out the old loan and registering the new mortgage.
- Check your new accounts and repayments. Confirm the first repayment date and, if you have a new offset account, that it is linked correctly. Existing redraw does not automatically transfer to the new loan.
You can explore the refinancing process and your options through Bheja. Keep making scheduled repayments on your existing loan until the lender confirms it has been paid out. After settlement, check your new rate, fees and repayment arrangements, and confirm the old loan has closed. If you change transaction accounts, update any salary payments and direct debits too.
Your rate can stay the same while better offers appear elsewhere. That’s the silent leakage we built Bheja to help borrowers spot. The Home Loan Health Check shows where your rate stands today. Once you connect your loan, Bheja keeps monitoring it and alerts you when it finds a better rate, so you know when it’s worth taking another look.”
— Pravin
FAQ
Switching may be worthwhile if the savings and benefits outweigh the costs. Calculate your break-even period, then compare fees, features and the remaining loan term. If your current lender offers a competitive rate on your existing loan, you may be able to save without switching.
