In simple terms, refinancing involves moving from one type of loan to another with a different rate or terms, either with your current lender or a new one. It can give you more flexibility with your money and let you adapt your loan to your changing life circumstances.
If you’ve put off taking a careful look at your home loan, you could be losing money and missing out on an alternative which is a better fit for your circumstances and values.
What is the purpose of refinancing?
Is it a good idea to refinance your loan? Why and when should you do it? Only you can decide what’s right for you. But if you’re thinking about changing your lender, one or more of these may help with the decision-making.
- Reduce the interest rate
Taking advantage of a lower interest rate is the number one reason people usually consider refinancing their loan. Reducing your monthly repayments can decrease financial stress and free up funds for other savings and spending goals.
You can use our refinance calculator to compare your loan and determine the savings you could make by moving to a more competitive loan.
- Shorten the term of the loan
New life circumstances like a job change or the easing of other financial obligations might have put you in a better financial position than when you originally took out the loan. In this case you might want to refinance to pay off the loan more quickly and shorten the overall term. While your monthly payment will often increase if the interest rate is lower, you could shave years off your loan so you pay less interest over time.
- Change to a different type of loan
You can refinance to alter the type of loan you have. For example, as your priorities shift, you might want to take advantage of the added features offered by a variable-rate loan. Or you might switch from a variable to a fixed-rate loan to give you certainty while you need it.
Refinancing can also give you access to a host of other great features, from additional payments and offsets to pause options and positive impacts. For example, our eco pause gives you the option to redirect funds to environmental improvements like installing solar panels.
- Access equity and consolidate debt
Refinancing can help you get your hands on some much-needed funds. If you have equity in your home, you can refinance and take out extra cash to pay for significant expenses like home improvements, holidays or your children's school or university fees.
Or if you have other sources of debt with high interest rates, you can increase your home loan and use the money to pay them off. At the very least, having a single repayment and 1 loan instead of 2 could give you some ‘administrative’ relief.
Perhaps you’ve thought about where your investments are being used. Or whether your existing bank cares about the same things you do.
When you think about it, your home is likely to be the most significant investment you’ll ever make, making the impact of the money you borrow far reaching.
Values-alignment is increasingly becoming a key factor for many making the switch to an alternative lender.
Refinancing might be the right option for you
It’s well worth considering whether refinancing is right for you by talking to our team about our home loan options, or by getting an independent assessment of the costs and benefits.
At Bank Australia, we’re here to dispel the myths surrounding refinancing and help you every step of the way. And, even better, once you get the tick of approval we can help you with all the paperwork. That includes contacting your existing bank – so you don’t have to.