When is the right time to refinance your home loan?

If you're a homeowner, it's a smart idea to periodically review your service providers to make sure you're still getting the best deal. Comparing your water, power, internet, home and contents insurance, etc. against competitors can save you hundreds of dollars a year. And your mortgage should be no different.

In fact, reviewing and refinancing your mortgage at today's record-low rates could save you thousands of dollars a year in interest, and tens of thousands of dollars over the course of your loan.

Why now is a great time to consider refinancing

In March 2020, the Reserve Bank of Australia (RBA) set the interest rate at just 0.25% - the lowest in history. In November 2020, the RBA reduced the interest rate further to just 0.10%. This was intended to stimulate the economy by reducing the cost of borrowing, thereby increasing the flow of money.

When it comes to mortgages, this means that interest rates may be significantly lower than they were when you took out your home loan. Refinancing can mean you save money on interest and pay off your loan faster.

Who can refinancing be suitable for?

Refinancing isn't necessarily suitable for everyone, but it may be right for you if:

1. Your interest rate isn't competitive
This is an obvious one - if your current interest rate is no longer competitive then you may be able to take advantage of the current lower rates.

2. You're coming to the end of a fixed-term
When you first apply for a home loan, you may have been offered an enticing introductory interest rate for a set period of time. Once this fixed-term is over, you may rollover onto a standard variable rate, which may not be as competitive.

3. You have multiple debts
If you have multiple debt repayments, consolidating them into one loan could make them easier to manage and repay. Rolling them together is known as 'debt consolidation' and can be used to turn short-term, high-interest debt like credit cards into longer-term, lower interest debts which can make them easier to manage and pay off.

Things to consider when refinancing

There are many factors to think about when deciding if refinancing might be right for you, including:

1. Your situation
It's always important to conduct a personal audit of your finances to make sure you know exactly where you currently stand. Are there factors or events coming up that could impact or change your current situation?

2. Costs and fees associated with refinancing
As well as new fees that may be charged when applying for a new loan, there are two further costs that you may need to consider when refinancing, depending on how old your home loan is and how it's structured.

If you took your home loan out before 1 July 2011, you could be charged an 'exit fee'. The exit fee was intended to cover the cost of lost interest earnings to the bank over the remainder of the loan period and was either a fixed fee or calculated according to the outstanding loan amount. Exit fees were banned in 2011, but if your mortgage is older than this then it's a good idea to check your mortgage agreement to see if an exit fee forms part of the conditions and, if so, how much you will be charged.

If you currently have a fixed rate home loan and would like to refinance or make additional repayments, then you may be charged a 'break fee'. When credit providers lend money at a fixed interest rate, they generally enter into a contract with a third party to lock in their funding costs for the same period. If the borrower breaks their loan during the fixed period or makes extra repayments, and wholesale interest rates change, the credit provider can make a loss. Break fees generally represent the cost of this loss.

3. Looking beyond just rates and fees
A popular benefit of refinancing is the ability to access a lower interest rate, but it's important to ensure that the home loan still has the features that you need.

Packaged home loans generally offer additional benefits like interest rate discounts, credit card fee waivers, insurance discounts and, sometimes, rewards points.

Even fixed home loans can offer different amounts of flexibility. For example, our award-winning fixed rate home loan allows borrowers to make up to $10,000 of extra repayments a year, so you can pay it off more quickly if you want.

4. Your desire to lock in the current low rate
For homeowners who want to lock in current low interest rates, refinancing with a fixed rate loan could be a good way to safeguard yourself against future interest rate rises.

5. Calculate what your repayments could be
If you'd like to see what your monthly repayments could be using our Fixed Rate Home Loan then click through to our mortgage repayment calculator and input your current loan amount to see the difference.

We're not the only ones who think it's worth checking out our refinancing options – Canstar recognised Qudos Bank as a 5 star 'Outstanding Value' fixed home lender, RateCity gave our Fixed 5 year home loan the coveted Gold award and Mozo bestowed four awards on us, including the 'Experts Choice' for the best fixed rate home loan. Visit our Fixed Rate Home Loan page to find out more about the $0 bank fees, 90 day rate guarantee (Ts & Cs and fees apply), ability to split with our lowest variable rate, and flexible features like extra repayments up to $10,000 a year, all available over 1, 2, 3, 4 and 5 year terms.