Mortgage Switching Calculator

Mortgage Switching Calculator

Mortgage switching serves many purposes, such as gaining lower interest rates or better loan features. Thankfully, there are tools such as our Mortgage Switching calculator to help you see for yourself. Mortgage switching, more commonly referred to as refinancing, is the process of changing your current home loan to another. This can either be changing the loan product but staying with the same lender or changing lenders all together.

To determine if you are eligible you can use our Income Tax Calculator and Credit Score Calculator.

Why should I switch my mortgage?

If you’re deciding whether or not you want to switch mortgages, there are many benefits that should be considered when you make a decision.

First and foremost, refinancing to another loan product or lender could save you thousands! As market rates are constantly changing, you may be able to achieve lower interest rates by refinancing. You can use our Home Loan Comparison Calculator to see how much you could save. Other benefits include:

• Lower repayments as a result of lower interest rates
• Consolidate your debts (e.g. car loans, holiday loans, and credit cards)
• Increase your borrowing or extend your loan term
• Potentially save extra cash with lower fees and charges. Some loans carry annual or monthly fees which can be avoided if you switch lenders
• Access new features that you don’t have on your current loan, such as an offset account or redraw facility

How long does it take to refinance a home loan?

When switching mortgages, the process is similar to that of applying for your original home loan. This means that the average time for refinancing is roughly 4-8 weeks. However, this time frame can vary, depending on the mortgage provider and your situation.

It's also worth noting that, as you are already the owner of the property, it's generally a more relaxed process in the event that you encounter any delays or challenges and need to delay your settlement.

This process can be done online with many lenders, or on the phone or through a broker. Some factors that may influence the speed of your refinance include:

• How long it takes you to provide your documents (the faster the better)
• The amount of information on your application (e.g. providing more than ample supporting paperwork)
• How fast your application is reviewed by the lender
• Your serviceability as a borrower (e.g. an applicant with strong credit rating may get a faster turnaround)

What fees are involved when switching mortgages?

While switching mortgages may help your savings in the long run, it is worth being aware of the costs associated with the process. These costs include:

• Discharge fee: You should look at your current loan agreement and find out if your lender has a discharge fee for closing your home loan. There also may be government charges to end the loan contract.
• Settlement fee and application fees: As you are getting a new loan product, it’s likely you will incur upfront costs for the settlement and application process.
• Breaking a fixed rate loan fee: This fee will be charged by the lender when you exit your fixed rate loan before fulfilling the agreed terms. This amount will be determined based on how much the lender stands to lose from you exiting the contract.
• Valuation fees: Valuation fees will be charged in the situation that you need to get your property valued by the new lender.
• Mortgage insurance costs: These will often be charged by the lender if the amount you owe on your property after refinancing is more than 80% of the property's value. Mortgage insurance costs may come in the form of LMI or another type of risk fee if LMI isn’t suitable.

To get a better understanding of how much these costs may set you back, it is worth utilising online tools such as our Lender's Mortgage Insurance Calculator and our Refinancing Costs Calculator.

Will I always save by switching?

While switching your home loan could save you money, it’s important to look at the full picture and make sure that the costs don’t outweigh the savings. Important things to consider include:

• You may have to pay lenders mortgage insurance a second time.
• The savings on your interest rate or remaining loan amount may not be significant enough to outweigh the costs you’ll incur.
• Ask your lender for a lower rate before switching mortgages. Your lender doesn’t want to lose your business, so they might be able to offer you a lower rate, which would save you the hassle and costs of refinancing.

How often should I refinance?

There are no rules about how often you can refinance your home. However, right now Australians are refinancing far more often than they used to. Currently the average duration of a home loan in Australia is 4-5 years, meaning, home owners are, on average, switching their mortgages within a 4-5 year period.

It’s recommended you regularly review your financial commitments as your circumstances change (such as switching jobs, having kids, etc.), including your home loan. More specifically, good times to consider refinancing include:

• When coming to the end of a fixed-term loan. Fixed-term loans usually have a lower interest rate during the fixed period and switch to a higher variable rate thereafter. Refinancing at this point can be a good way of keeping your monthly repayments low.
• Refinancing based on reductions in the cash rate and market fluctuations. If your current loan doesn’t have a competitive rate, it’s worth utilising these cuts to get a better deal on your home loan.

It's worth noting that refinancing is not the best option for everyone and it's important to do your research before making a switch.