Looking to save money in 2022? It might be time to refinance your mortgage. Refinancing your loan can be a great way to save money and boost your budget.
According to external refinancing figures released by the Australian Bureau of Statistics (ABS) in October 2021, more than 498,000 Australians are refinancing their loans. A total of $ 16.08 billion in home loans was refinanced from one lender to another.
How Much Money Can I Save By Refinancing a Mortgage?
When you refinance, you may be able to give yourself an instant pay raise! Well not really, but the extra money in your pocket will make you look like you did. This is because if you are able to switch to a lower mortgage rate, your monthly repayments will be lower, which means you will save more money.
To get you an idea, let’s take a look at the monthly repayment differences on a selection of loan rates and sizes. As noted below, the lower the interest rate, the less you will pay. For example, if your current loan amount is $ 750,000 with an interest rate of 3.75% per annum and you manage to refinance at a new rate of 2.75% per annum, you will be able to save $ 326 $ per month and $ 3,912 per year.
|$ 250,000||$ 500,000||$ 750,000|
|2.25%||$ 1,300||$ 2,601||$ 3,901|
|2.75%||$ 1,353||$ 2,706||$ 4,059|
|3.25%||$ 1,407||$ 2,813||$ 4,220|
|3.75%||$ 1,462||$ 2,924||$ 4,385|
These numbers are based on an owner-occupier paying principal and interest over a 20-year period. You can calculate your own numbers using our mortgage payment calculator.
What should i look for in a new home loan?
When considering a new home loan, there are few things you might want to consider before deciding on the right one for you.
What type of interest rate do you want?
- Fixed interest rate: If you want your interest rate to stay the same for a period of time, you can go for a fixed rate loan. If you set yourself a low fixed rate, you’ll know exactly how much your repayments will be for a few years.
- Variable interest rate: This option is ideal for refinancers looking for flexible loan features and competitive rates. For example, a 100% offsetting account facility is generally only available with a variable rate loan. However, keep in mind that with a variable loan, your rate can change at any time.
- Split-rate loan: If you want your loan refinance to be a mix between the two rate options, you will want a split rate loan. This means that part of your loan will be fixed, which will give you some rate security, and part will be variable, allowing you to take advantage of features such as the Clearing Account.
Are there any additional loan features that are beneficial to you?
As mentioned above, there are a variety of home loan features – like an offsetting account – that could help you decide which loan is best for you.
Some features that you can consider are:
- Additional Refunds: Making additional payments will help you pay off your loan faster and reduce the total amount of interest you will pay. There are many lenders who offer the option of making additional free repayments.
- Compensation account: Another way to reduce the total interest you pay is to get a home loan with an offset account. Mortgage compensation is designed to serve as an alternative to your everyday trading account or savings account as a place to park your money, but instead of earning an interest rate, a compensation will help you reduce the amount of interest you pay on your loan.
- Ease of redrawing: If you choose to make additional repayments on your home loan, you can get them back if your loan has a repayment facility. However, it is generally only available with variable rate loans.
How much will you pay in fees?
There are a few costs to be expected when looking to refinance your loan. Just like when you first applied, you will need to go through a similar application process when refinancing.
You will need to keep in mind that it may include a Registration fees from your new lender. In addition, when you leave your former lender, you may have to pay a discharge fee it can range from $ 0 to $ 600. If you are switching from a fixed rate loan, you may also be charged a breakage fee in addition to the discharge fee, which can be significant. It is therefore worth evaluating the cost-benefit ratio before switching.
What are the best home loans to refinance?
If you want the best of the best, check out our Mozo Expert Choice Award winners for home loans. Over 500 loans have been analyzed and compared by a panel of judges to present the loans that offer great value to Australian borrowers.
Ready to find out how much you can save by refinancing your mortgage? Check out the Home Refinance Loan Comparison Chart below to begin your refinancing journey. Or if you’re looking for even more information on refinancing your home loan, check out our range of refinancing guides.
* CAUTION: This comparison rate only applies to the example (s) given. Different amounts and conditions will result in different compare rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but can influence the cost of the loan. The comparison rate displayed is that of a guaranteed loan with monthly repayment of principal and interest of $ 150,000 over 25 years.
** The initial monthly repayment figures are only estimates, based on the advertised rate, loan amount and term entered. The rates, fees and charges and therefore the total cost of the loan can vary depending on the amount of your loan, the length of the loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.
^ See information on the Mozo Experts Choice Home Loan Awards
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