When Can I Refinance My Home Loan?

Buying a home and getting a mortgage is an exciting but long-term financial commitment. When you first close on your mortgage, refinancing is likely not something you’re thinking about right away. However, over the years, your financial situation can change – interest rates could drop, your credit score may improve, or you may need access to some extra cash. 

These changing circumstances can make refinancing your existing mortgage an attractive option down the road. So when can you refinance your home loan?

What Does Refinancing a Home Loan Mean?

Refinancing a home loan means that you are switching your home loan to a better deal, sometimes with a different lender. When you stay with your original home loan lender, you may not be receiving the best deals available. Many lenders keep the best rates for new customers to attract them to their company.

You can save a significant amount of money by switching to a lower-rate home loan, allowing you to keep more of your hard-earned cash! Refinancing your home loan is often a straightforward process.

When Can You Refinance Your Home Loan?

There are no strict legal restrictions on when you can refinance your home loan in Australia. Technically, you could refinance the very next day after closing on your original mortgage. However, refinancing so soon is generally not recommended for several reasons.

Upfront Costs

Refinancing involves closing costs like lender fees, title searches, valuation fees, and more. These can easily add up to thousands of dollars. Refinancing shortly after taking out your initial loan means you won’t have had much time to recoup those original closing costs before paying more fees.

Credit Impact

Each time you apply for new credit, including a refinance, it results in a hard inquiry on your credit report. Too many of these in a short period can temporarily ding your credit score.

Break Fees

If you are refinancing out of a fixed-rate mortgage during the fixed period, you’ll likely face steep break fees from your current lender.

So while there’s no minimum waiting period, most experts recommend waiting at least 6-12 months after your original loan before considering a refinance. This gives you time to recoup initial fees and improve your equity position through paying down principal.

The refinance process itself can take 30-60 days from application to closing once you find a suitable new loan product and lender. Refinancing with your current lender is usually faster.

Any type of home loan can be refinanced – fixed, variable, interest-only, etc. But certain loan features like fixed periods do make the process more complicated and costly.

Ultimately, the best time to refinance is whenever you can secure a loan with better terms that leads to substantial monthly savings after factoring in all the associated refinance costs. Look up the latest home loan interest rates with your current rates to review your current home loan and decide if it’s time to refinance.

How Often Can You Refinance Home Loan?

When it comes to refinancing a home mortgage, there are several factors that determine if and when it makes sense to do so. Most mortgages have a minimum seasoning period of around 6 months, meaning you need to have had the mortgage for at least that long before you can refinance. 

Additionally, you typically need at least 20% equity in your home to qualify for a refinance. If your home value has appreciated enough that you now have 20% equity, even if you didn’t originally, that can make you eligible. Beyond equity and seasoning requirements, your interest rate and financial situation are important considerations. 

If current interest rates are at least 0.75% lower than your existing rate, refinancing may be beneficial to obtain a reduced rate. However, your credit score and debt levels need to have remained stable or improved since you originated your mortgage, as lenders will re-evaluate your finances. 

While there are no strict limits on how often you can refinance, doing so too frequently can incur fees and costs that outweigh the benefits. As a general guideline, every 2-5 years is a reasonable timeframe to consider refinancing if the numbers make sense based on your situation. 

What To Consider When Refinancing

How Much Does It Cost To Refinance A Mortgage?

The cost of refinancing a mortgage in Australia can vary depending on several factors, but here are some common fees you might encounter:

  • Application fee: Fee charged by lender just for processing your refinance application
  • Appraisal fee: $600 to $2,000 to have the property’s value assessed
  • Attorney fees: Fees for legal review of paperwork (varies by state/territory)
  • Title search and lenders mortgage insurance: 0.5% to 1% of property value
  • Origination fees: 0.5% to 1% of the loan amount paid to lender
  • Registration fees: For switching lenders
  • Property valuation fee

Refinancing in Australia can cost 2-5% upfront. No-closing-cost options seem attractive, but often come with a slightly higher interest rate, potentially increasing your monthly payment. However, they can be helpful if you’re strapped for cash upfront. 

Consider your situation and compare total loan costs (interest + fees) for both options over the loan term. Consult with our mortgage broker to help find yourself the best refinance deal.

How Does Refinancing Affect Your Credit Score?

Refinancing your home loan won’t hurt your credit, although the application itself will leave a hard inquiry on your credit report.  A hard inquiry may reduce your credit score slightly. This will only offer a negative impact on your refinancing application if your score is borderline between being ok and good.

However, making several hard inquiries within a short time frame can impact your credit score. Seeking the services of a professional mortgage broker reduces the chance of multiple hard inquiries occurring due to the processes we use.

If you decide to take a cash-out refinancing loan, the amount of money you owe on the new loan will increase. This may impact your credit score when a higher amount of debt is recorded.

How Much Equity Do You Need to Refinance?

Most lenders in Australia generally require you to have at least 20% equity remaining after the new loan amount to refinance and borrow additional cash out of your home’s equity.

For example, if your home is currently valued at $500,000 and your remaining mortgage balance is $300,000, you have $200,000 in equity (40% equity). Many lenders would allow you to refinance and take out up to $100,000 of that equity in cash.

Your new loan amount would be $400,000 after the cash-out refinance in this scenario. While taking cash out increases your mortgage balance and monthly payments, you may still be able to secure a lower interest rate or shorter remaining loan term when refinancing.

Borrowing against your equity provides flexibility to use those funds for renovations, investments, buying another property, or other large expenses. Just keep in mind your repayments will increase with a higher loan amount.

Lenders also tend to charge slightly higher interest rates, around 0.5-1% above standard rates, for cash-out refinance loans due to the higher loan-to-value ratio. 

Can You Borrow More When You Refinance?

You can choose to borrow more money when you refinance, providing your home has sufficient equity available.

You could take this cash from your home equity to renovate or extend your home. Or perhaps you want to buy a second home and need cash towards a deposit? 

Of course, when you borrow more money, your repayments will increase. A refinance home loan could still achieve a lower interest rate and shorter loan term, however, despite increasing the amount borrowed.

Whatever the reason, Odin Mortgage can help you secure a great cash-out refinance loan and let you access YOUR money!

Need Help Refinancing Your Home Loan?

Odin Mortgage simplifies refinancing for Australian expats by offering a guided, expert-backed process to help you save money and access your equity, allowing you to use it towards your financial goals.

Why Should You Refinance Your Home Loan?

Refinancing your home loan can save you money if you switch to a lower interest rate. Many homeowners refinance to withdraw a portion of equity from their homes. You could take this cash to renovate your home, make an investment, or purchase a luxury car or holiday. 

Perhaps your credit score is now higher and better rates have opened up to you? Or maybe you want a shorter or longer loan term?

As a first homeowner aiming to pay off your mortgage quickly and affordably while building equity, refinancing can offer several notable benefits:

  • A lower interest rate
  • Reduced fees and charges
  • Lower monthly repayments
  • Avoiding a high revert interest rate once an introductory period ends
  • Cash incentives from the lender
  • Access to additional features and facilities

Pros and Cons of Refinancing Your Home

Pros of Refinancing Your Mortgage

Refinancing your home loan is a simple task for your mortgage broker to complete. However, you must be fully clear about the pros and cons of refinancing your home loan, before leaping.

Here are the benefits of taking out a refinancing home loan.

Lower Interest

Sensible homeowners are always looking for the latest and greatest home loan deal! Refinancing your home loan can ensure that you achieve a lower interest rate and save you money each month.

The accumulation of these savings is staggering across the year, and certainly across the loan term!

Shorter Home Loan

You could also reduce the loan term and shorten your mortgage. If your original mortgage spanned 20 years and you refinanced to a 15-year loan, you will save 5 years of interest!

Your monthly repayments will likely increase when you shorten the home loan. However, throughout the loan, you will save a considerable amount of money!

Change Loan Type

Are you in a variable interest rate home loan and want to switch to fixed-rate loan repayments for stability? Or, are you at the end of a fixed interest rate home loan and want a variable rate to enjoy reduced repayments?

You can change the type of loan you have by seeking a broker service. We can advise you about the best loan types for your circumstances and the current climate.

Make the right decision at the right time!

Cash-Out Refinance in Australia

Do you need to withdraw some of the equity from your home? You can refinance your home and take out a lump of cash in the process.

Your repayments will increase, however, as you are borrowing more money. Although, releasing the cash enables you to extend and renovate your home, or make a great investment or luxury purchase!

Offset Account

Lenders are offering new features to their home loans in a bid to beat the competition and look attractive to the customer.

Ask your mortgage broker about how offset accounts work when you refinance. An offset account can be used to reduce the interest payable on your home loan. 

For example, let’s say you owe $500,000 on your home loan. You place $150,000 in an offset account. This is still your money but is temporarily placed in the offset account. The money in the offset account reduces the interest you pay, so you only pay interest on $350,000.

Redraw Facilities

Lenders may offer redraw facilities. This enables you to pay extra payments off your home loan debt, without charge. 

You are then able to ‘redraw’ the extra money you paid into the home loan debt if you wish.

Cons of Refinancing Your Mortgage

Are there any cons to be aware of when applying for refinancing? Here are the disadvantages of taking out a refinancing home loan.

Lender Fees

Always be clear as to what fees are payable. Firstly, will your current lender allow you to switch to another lender or a different deal? 

If you are on a variable interest rate deal, then you should be able to refinance your home loan easily. There should be no fee payable to be released from the home loan deal.

Is your fixed interest rate home loan coming to an end of the fixed period? If so, you should be able to switch deals without paying a fee. If you are still bound by a fixed rate deal, you will need to pay an exit fee to be released.

Refinancing Fees

Some lenders and brokers may charge you a fee for their service and for securing your home loan.

Refinance Your Home Loan with Ease

Don’t let high interest rates or lender fees hold you back from achieving your financial dreams. Take control of your home loan today with Odin Mortgage’s streamlined refinancing process tailored for Australian expats. 

Our mortgage brokers will guide you every step of the way, ensuring you secure the best rates and terms to maximise your savings and equity access. 

Book a discovery call to discuss your future plans and investments.

Frequently Asked Questions

Your mortgage repayments consist of principal and interest repayments. Your principal repayment is the amount of money you pay each month to pay back the money borrowed. 

Each principal repayment reduces the amount of money you owe the lender.

Interest repayments are also paid monthly although this money does not reduce your home loan account. The lender receives this money in its entirety.

Usually, you will pay home loan repayments in one instalment each month. Therefore, you may not realise you are paying principal and interest repayments! This should be clearly written on your annual mortgage statements, however.

You will only need to pay lender’s mortgage insurance if there is less than 20% equity available in your home.

If you have agreed to a cash-out refinancing home loan, there is a chance that your equity will shrink considerably. This depends on how much money you have taken out of the equity, and the equity available in your home.

If there is less than 20% equity left in your home after refinancing, you may have to pay LMI. This is merely an insurance cover to protect your lender’s finances in the event of defaulting repayments. 

It is an extra expense for you to pay monthly, however, and so should be avoided if possible.

The refinancing lending criterion is very similar to the criteria used by your existing lender when you secured the original mortgage.

Lenders will examine your ID, your income and employment, and your assets. Lenders will also assess your debts and expenses, and determine your borrowing power.

In addition, your home will be assessed. Lenders may ask for a valuation of your home to assess the value of the equity present. This would certainly be a requirement if you want to take cash out of the equity.

Your repayment history with your existing lender will also be looked at to determine what type of borrower you are.

When refinancing, you pay off your existing mortgage and take out a new loan, ideally with better terms like a lower interest rate. You’ll go through application/approval and closing processes similar to your original mortgage.

The amount you can save by refinancing your home loan depends on your current interest rate compared to available refinance rates.

You could save a nice chunk of money each month through refinancing, building to a substantial saving across the loan term.

Yes, you can refinance from a 30-year to a 15-year fixed-rate mortgage. This will increase your monthly payments but allow you to pay off the loan faster.

Not necessarily. Many lenders permit refinancing after just 6 months, while others have no fixed waiting period. Waiting a year is just a common guideline.

Not necessarily. Many lenders permit refinancing after just 6 months, while others have no fixed waiting period. Waiting a year is just a common guideline.

Refinancing closing costs are typically 2-5% of the loan’s principal amount. You’ll pay lender fees like origination and appraisal, in addition to third-party fees like title insurance.

Refinancing may lead to a small temporary credit score drop due to the hard inquiry and opening a new loan account. But with on-time payments, your credit can improve long-term.

Yes, refinancing effectively “resets” your mortgage to a new term, whether 15 or 30 years. So the clock restarts on paying down principal.

Absolutely. Many homeowners choose to refinance with their current lender if they can offer competitive rates and terms to make refinancing worthwhile.

Odin Mortgage Logo
Featured In
Geo Expat Logo
Asia xpat Logo
Expat.com Logo
Expat Living Logo
Easy Expat Logo

10 Best Tips for Australian Expats to Maximise Borrowing Power & Approval Success