There’s no denying that the country is going through tough times, and many households are feeling the pinch.
With the cost of living continuing to rise, more people are looking for ways to cut back on unnecessary spending. For many, one of the biggest expenses is their mortgage, and that’s led to record numbers of homeowners switching banks in search of better deals.
Refinancing your home loan can save you money, but it’s essential to do your research and understand the full picture before making the move.
1. Timing Is Everything
Recent cuts to the Official Cash Rate (OCR) have brought some welcome relief. The Reserve Bank’s recent cuts took the OCR to 2.5% and it has suggested further reductions may be on the way. Lower interest rates can mean significant savings over time, so timing your refinance when rates are favourable is key.
2. Don’t Forget Break Fees
If you’re on a fixed-term loan, breaking your agreement early may come with break fees. These fees depend on:
- Your current fixed interest rate
- The remaining term of your loan
- The difference between your fixed rate and current market rates
- The amount you’re borrowing
Break fees can be substantial, so make sure to get a clear estimate before committing to a refinance.
3. Factor in Legal Costs
Refinancing usually requires the services of a lawyer to act as an intermediary between your current and new bank. Legal fees can vary so be sure to factor this into your budget. You can view our refinance fees here.
4. Take Advantage of Cashback Offers
Many banks offer cashback incentives for new mortgage customers, typically ranging from 0.6% to 1% of your loan amount.
However, keep in mind the clawback period. If you leave your new bank within three to four years, you may be required to repay some or all of the cashback.
5. What We Need From You
To meet anti-money laundering requirements, you’ll need to provide:
- Certified photo ID and proof of address (signed by a JP or solicitor) or
- Complete online verification using tools like APLYiD.
You’ll also need to:
- Sign legal documents in person at your solicitor’s office or via an online meeting
- Contact your insurance provider to update your mortgage details with your new bank
Is It Worth It?
Refinancing can be a smart financial move, especially in a falling interest rate environment, but it pays to look beyond the headline rate. Make sure you understand all fees, obligations, and long-term impacts before making the switch.
