Mortgages & Refinancing

The two most common reasons for refinancing usually occur when:

  1. You may have reviewed your current home loan or investment property loans and be considering refinancing, perhaps with a different financial institution;

  2. You may consider refinancing for different reasons, such as wishing to increase your borrowings for a particular purpose, or you may be wishing to take advantage of a lower interest rate.

Deciding to go with another financial institution

Your decision to go with a different financial institution is one that will involve balancing the cost of refinancing against the savings available through a lower interest rate. In any case a refinance is going to result in costs and accordingly it will always be sometime before you reap the benefit of lower interest rates to the extent that you will have recouped those costs.

Refinancing & Interest Rate Changing

You may be wishing to refinance to get out of a high interest loan and into a loan with a lower interest rate. To do this you will need to refinance in order to draw on equity that has grown due to the appreciation of the value of your property, you may wish to refinance to get a loan with better features such as fixed rate options, split loans, line of credit type facilities, redraw facilities and the like. If the cost of refinancing seems prohibitive then an alternative is to approach your bank and enquire as to whether they will agree to vary your loan terms to give you those things that you are seeking from a refinance.

Clearly refinancing to take advantage of lower interest rates is more likely to give you a good result if you intend to keep the property for a longer period. You will be unlikely to get any benefit from refinancing if you end up selling soon after the refinance.

Costs involved

Before committing to a refinance you should insist that you be provided with a detailed costing. Some of the costs will be incurred in discharging your existing loan as you may be liable for a discharge fee, legal costs, early repayment fees as well as interest break costs. Costs can be considerable if you have a fixed interest loan and you are paying out the loan at a time when interest rates are lower as your loan is likely to have provisions which require the application of a formula to reimburse the lender for their lost interest.

The new financial institution will have numerous fees including an application fee, valuation fee, legal costs, title searches, registration fees and they may insist on mortgage insurance, a survey, a council building certificate and perhaps all the property enquiries.

If you are considering refinancing an investment property then there may be some effect on your tax situation. In those circumstances it is important that you refer the question of refinancing to your tax adviser or accountant.


Regardless of your reason for refinancing you should be prepared to consider the loans offered by a number of financial institutions. You may wish to engage a mortgage broker to assist you in this regard. A loan officer of the financial institutions and a mortgage broker should be able to explain to you the different types of loans such as fixed interest, interest only, principal and interest, variable rates as well as the different "honeymoon periods" that are sometimes offered. You must be aware that obtaining a fixed interest loan can backfire if rates fall. Alternately you will make considerable savings if you obtain a fixed interest loan for three or five years at a time when interest rates rise.

Stamp duty is payable on loans financing property. There is a concession that may be available to you on refinancing. You should make proper enquiries as to whether the stamp duty concession is available to you before committing to refinance.

Loans can easily become a major source of aggravation for lenders whose initial motivation is often just to help out the borrower. Regardless of whether you are lending to a close family member or to a complete stranger, you should allow sufficient time to properly negotiate and formalise all of the terms of the loan agreement.