Refinancing your home loan can be a complicated step, even though the mortgage market is now quite competitive. As a result, it’s critical that you understand what’s involved and whether refinancing is the best decision for you.

Here are some suggestions about where to begin:

1. Consider why you’d like to remortgage. One’s circumstances are more important than a good credit rating when it comes to refinancing. Whether you’re looking to free up cash, invest in a new property, improve your house, or simply get a better deal, you’ll need to decide whether you want to lower your monthly payments, pay less interest throughout the life of the loan, or simply pay it off sooner. These considerations will guide you in determining which home loan package is most suited to your circumstances.

2. Do your research. Take a look around to see what offers are available. Make sure to assess the interest rates as well as the length of the loan. There are a variety of home loan solutions available, ranging from basic loans with a lower interest rate but fewer features and perks to more comprehensive banking packages with somewhat higher interest rates but more offset and redraw options. Alternatively, you can open an offset account to lower your loan’s interest payments; the larger the offset, the less interest you’ll pay during the loan’s term. Look for a house loan with the shortest term if you want to pay off your debt as quickly as feasible.

3. Speak with your current financial advisor first. Changing lenders is significantly more complicated than simply switching to a new home loan product with your current bank, so it’s always worth asking whether you can get a better offer right now. As we get older, our needs change, so life events like starting a family, moving from an apartment to a house, or downsizing may mean that a home loan that was appropriate a few years ago is no longer the best option for you.

4. Investigate the true cost of switching. Although switching can save you money in the long run, there are other aspects to consider that could increase the cost. Be wary of initial deals that charge a low interest rate for the first one to two years before switching to a considerably higher rate. You should also check your current contract to see whether you’re subject to any discharge fees or break expenses on fixed loans. Refinancing may affect your tax deduction (see your accountant) — for better or worse, double-check whether your home loan interest deduction will increase or decrease.

5. Make sure you know how your numbers add up. Lenders will consider how much equity you have in your home, if property prices have increased or decreased since you purchased it, your debt-to-income ratio, and your credit score. If you have less than 20% equity in your home, refinancing may be costly, and you may be required to take up Lender’s Mortgage Insurance (LMI), which will add to the overall loan cost. You’ll also need to figure out what your break-even point is – that is, when the costs of refinancing are covered by your monthly savings – and whether you intend to maintain the property long enough to gain from refinancing.


It is important that you conduct a thorough cost-benefit analysis prior to refinancing. If it’s all too much for you, you can have your bank or a trustworthy broker do it for you. After you’ve done your research and determined that the transfer is worthwhile, all you have to do now is contact your lender to arrange the paperwork.

Book a call to learn more about how a Micah Finance Solutions Specialist can assist you with your home finance needs.