Refinance

Refinancing is where you take out a new loan to replace your existing home loan, either with the same lender or by switching to a new lender.

You might consider refinancing if you;

• Are paying too much for your current loan
• Want a lower interest rate
• Want a loan with more features such as redraw or an offset account.
• Want to use the equity in your home to renovate or improve your lifestyle
• Want to consolidate other debts into your mortgage.

Steps to refinancing

The first thing to do is to look at your current loan including the type of loan it is, the interest rate you’re paying, the features it offers and the fees you’re paying and identify the things you would like to improve with a new loan.

You can then compare it with other loans on offer to find a better deal. Remember to factor in any costs associated with exiting one loan and taking out another.

The best way to crunch the numbers is with a refinance home loan calculator.

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  How to Refinance Your Home Loan with Tic:Toc: A Step-by-Step Guide

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  The Ultimate Guide to Different Types of Refinance Loans

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  What it costs to refinance your home loan

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  Refinancing to consolidate debt

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Every lender has their own formula for calculating your borrowing power, and they generally look at six main factors.

• Deposit - the larger your deposit, the more you can borrow and the less interest you’ll have to pay on your loan.
• Income – this is not just how much your household brings in, but how much is left for home loan repayments after the bills and day-to-day expenses are paid.
• Level of debt – how much you owe on other loans and credit cards will also influence your available income.
• Savings history – having a savings history of at least 3 months demonstrates to a lender that you’ll be able to manage your home loan repayments.
• Credit rating – a sound credit rating is one of the first things lenders look at, as it is based on your borrowing and repayment history.
• Home loan term – a lender will look more favourably at a longer loan term, but remember it will mean you pay more interest over the life of the loan.
• Property value - a lender may conduct a valuation of your chosen property to determine the amount they are willing to lend you.

​​You can get an upfront estimate of your borrowing power with Tic:Toc with our borrowing calculator.

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  Borrowing power explained

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  How credit scores affect your home loan application

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To calculate whether refinancing is worth it first calculate your monthly savings. To do this, compare the monthly payment of your current lender to the monthly payment of the new loan. Just use our refinance calculator to determine your monthly savings if you refinanced with Tic:Toc.

Next, calculate what it costs to refinance your home loan. These are all the fees it costs to refinance. They include ‘closing your old loan fees’ ( such as discharge fees, break fees for fixed home loans etc) + ‘opening your new loan fees’ ( government fees, third party fees).

Then divide the monthly savings by your total closing costs to figure out how many months it takes to break even.

Related articles from our Home loan guide

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  The Ultimate Guide to Different Types of Refinance Loans

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It makes a big difference to your interest payments. Say you had a $600,000 home loan with a loan term of 20 years. The difference of having an interest rate of 2.5% instead of 3% is: $149 in monthly repayments savings and $35,561 in interest savings over the life of your loan. You can estimate your monthly repayments on a Tic:Toc home loan, and total interest charged with a repayments calculator.

Related articles from our Home loan guide

• 

  What it costs to refinance your home loan

  Read full article

A lower interest rate, lower monthly repayments, and a shorter loan term are the top three potential benefits of refinancing your home loan.

Related articles from our Home loan guide

• 

  How to Refinance Your Home Loan with Tic:Toc: A Step-by-Step Guide

  Read full article

The first thing to do is to look at your current loan including the type of loan it is, the interest rate you’re paying, the features it offers, and the fees you’re paying. Identify the things you would like to improve with a new loan. For example, maybe you want to pair your fixed-rate with an offset account? Or maybe you want to move from a fixed rate to a variable rate?

Next, crunch the numbers to calculate how much you will gain from refinancing. Use our refinance calculator to determine your monthly savings if you refinanced with Tic:Toc

Next, watch out for fees. Every lender has its own set of fees for refinancing. Expect to pay ‘closing your old loan fees’ ( such as discharge fees, break fees for fixed home loans etc) + ‘opening your new loan fees’ ( government fees, third party fees).

Then divide the monthly savings by your total closing costs to figure out how many months it takes to break even.

Once you have calculated if it's worth it to pursue a refinancing home loan, shop around for the best refinance rates and features and find a home loan that suits your scenario. Then, choose your new lender and apply. How long will the process take? Every lender is different. With Tic:Toc, your refinancing online home loan application will take approximately 20 mins.

You can refinance a loan whenever you want, but you should only switch if you can get a better deal. A refinancing loan comes with upfront costs such as break fees (if you’re on a fixed loan), exit fees and open fees. When deciding, calculate how long it takes to recoup the costs of refinancing.

Not sure whether it’s worth undertaking a home loan refinance? Use our refinance calculator to figure out how much you could save by getting a refinancing home loan with Tic:Toc.

Refinancing usually happens within a 60 day period from start to finish. There are 5 main steps to refinancing: application, approval, contract, settlement, payment.

When you apply online your application process will take you about 20 mins to complete. Once completed we'll tell you whether or not your refinancing application is approved — or declined. Generally, this is pretty quick, but it will depend on the complexity of your application and the number of applications we are processing at the time. The quickest we've ever fully approved an applicant from the time they submitted their application was 58 minutes. Once you are approved we will send over a contract for you so you can sign.

Next is the final settlement and payment process. This is where the money changes hands. When you are refinancing, the money is transferred between loan providers (your current lender and Tic:Toc) on the settlement date. The settlement date depends on when both banks have everything they need to transfer the loan. This is generally worked out by our solicitor/conveyancer and your current bank’s settlement department. It can take up to 3 weeks.

Your credit score may take a dip in the process, but it can recover and it's normal. A temporary credit hit is likely to be outweighed by the financial gain of a home loan refinance. When you apply for a new loan lenders will check your credit history to see if you are a risky buyer. This is called a ‘hard inquiry’. It shows up on your credit report and too many hits can temporarily cause your credit score to drop. To avoid too many credit inquiries, shop around for the best deals before you apply for a home loan.

Set a goal for what you’d like to get out of refinancing. Some refinance to save money or to access new features, while others might refinance to set a new loan term or to change loan types entirely.

Then, compare whether you would be better off by refinancing.

If your goal is to save money, compare whether you will be better off financially by refinancing. Make sure to account for any exit fees from your old lender, and any establishment fees from your new lender. You can use a refinancing calculator to find out what your new repayments could look like.

If you’re still unsure, consider seeking financial advice from a professional.

There are tax implications for owning property, particularly in respect to purchasing an investment property to rent out. Contact your accountant or a financial advisor to understand the full tax implications of your personal circumstances.

The Australian Tax Office (ATO) also provides some information relating to claiming rental expenses.

The amount of income you need to qualify for a refinance home loan will vary depending on many different factors, including how much you wish to borrow, your pre-existing equity, your living expenses, and any other debt or liabilities you may hold.

You can learn more about serviceability in our Home Loan Guide.