If you’re staying with the same lender, and provided the specific terms and conditions of your loan permits it, your loan could be restructured to be paid over a longer or shorter time, or with a different monthly interest rate or reduced fees.

If you’re refinancing with a different lender, your new lender will take over your debt and provide you with a new and more advantageous debt plan.

People generally refinance for a number of reasons:

• Newer and better deals frequently appear on the market which are more advantageous or less costly, allowing you to save more.
• You may want to consolidate debt from your credit cards or other loans to lower overall interest rates and simplify your repayments. For more information, see our Debt Consolidation page.
• Your financial situation may have changed and the current plan you’re on may not be suitable for your monthly budget.
• You may be able to access loan features better tailored to your current needs. For example, you may wish to borrow some extra money for renovations or to put towards an investment property. You may wish to refinance your existing debt at a higher LVR, to take both advantage of a better interest rate and give you access to funds for other needs.

While refinancing can often be very handy, it may have potential costs you should look out for before you commit to any plan of action. Things to look out for may include:

• Application & Registration Fees – these may not be disclosed upfront, but may add to the overall cost.
• Valuation fees – Charged for the valuation of a property.
• Mortgage insurance.
• Early payment, discharge or settlement fees – as the name suggests, payments that you might be liable to make to your existing lender to terminate your loan, even if the loan itself is being paid off. These may or may not exist, and it is advisable to check your existing liabilities or speak to one of our mortgage brokers to go over the files with you.
• Attractive honeymoon rates which revert to a higher ongoing rate, thus costing you more over the long run.

These costs will not apply in every case, but need to be evaluated on a case by case basis. While a prudent refinancing can save money, you might also end up paying more money or interest overall should you extend your current loan period. Early payment or settlement fees usually apply if you’re exiting a fixed rate loan. Speak to one of our brokers to learn more about the costs and potential benefits of switching from your current plan.