Can refinancing your home loan save money?

The simple answer is yes, a refinanced mortgage could save you money. With the right home loan refinance, you could save thousands of dollars on your mortgage. This is one of the main reasons why people refinance their home loans in the first place. 

Here are the different ways refinancing your home loan can help save money: 

Get lower interest rates 

You could get lower interest rates on your mortgage when you refinance. If interest rates have decreased significantly since you took out your current loan, it may be wise to switch from your high-rate mortgage to a newer, lower-rate one.  

Alternatively, you may find yourself in a much better financial position which could qualify you for a better rate compared to what you have now. If you’ve recently increased your savings, cleared outstanding debt, and improved your credit score, it may be worth revisiting your current home loan to see if a home loan refinance could get you a better deal. 

With lower interest rates, not only will your repayments decrease but you’ll also be paying less on interest over the life of the loan. 

Change your repayment scheme 

Refinancing to modify your repayment scheme can be beneficial as it reduces the overall interest paid on your loan. Paying your mortgage in weekly or fortnightly instalments can also shorten your loan term because you’ll be paying more per month. 

Adjusting your repayment frequency can also make mortgage payments more manageable. Instead of paying a sizable amount every month, you can break up your payments into smaller but more frequent repayments. Before you look to refinance to change your repayment schedule, check with your existing lender to see if they can help you first, as they may be able to accommodate your request too.

Shorten your loan term 

Home loan refinancing allows you to reduce your loan term. Shortening your loan term could save you on interest costs although your repayment amounts could increase. A shorter loan term also puts you on the fast track to fully owning your home. You don’t have to wait a few decades to finally call your home your own.

A shorter loan term can help you gain greater flexibility, too. You’re not weighed down by decades of repayments and can be debt-free sooner rather than later. This could be more beneficial for the long term as you’ll have more financial freedom and disposable income that can be used for investments or towards your retirement. 

Switch home loan types 

You can go from a fixed rate home loan to a variable rate home loan and vice versa. Fixed and variable rate home loans offer their own set of pros and cons. If you have a variable rate home loan and find a mortgage with lower fixed rates, refinancing to lock down those lower rates may be beneficial. 

On the other hand, switching from a high-interest fixed-rate home loan to a more flexible variable-rate home loan could be a good idea. A variable home loan may also give you access to loan features like extra payments without additional fees. It all depends on what your financial goals are and choosing a loan type that can help you achieve them.

Note that if you want to switch from an existing fixed rate home loan to another lender, fixed rate break costs may apply for breaking the fixed term early. Reach out to your lender to check for any costs that may be involved.

Add an offset sub-account 

A home refinance can give you access to features like an offset sub-account which can help you save money. An offset sub-account is a facility linked to your home loan that you can use to reduce the outstanding balance on your home loan which in turn reduces the interest on your repayments. 

The amount in a 100% offset sub-account will be subtracted from the overall outstanding balance of your mortgage, for the purpose of interest calculations. You can use an offset sub-account as a normal transaction account wherein you can withdraw and deposit funds.  

Before you look to refinance, it's always best to discuss your options with your existing lender. Existing loans.com.au customers have access to a range of features, such as the ability to switch their home loan from variable to fixed and vice-versa, without the need to refinance

Should you refinance your home loan? 

If you’re still on the fence about refinancing your home loan, get in touch with our friendly lending specialists to learn more about your mortgage refinance options. We can help you figure out which refinance solution is best for you! 

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