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The dos and don'ts of refinancing a home loan

With so many different sources of information out there, it can feel overwhelming knowing what to do (and not to do!) when refinancing.

That’s why we’re here to help you on your refinancing journey, whether you’ve made the decision to switch loans or you’re considering your options. Read on to learn what you should do, and the things you can avoid doing, to refinance your home loan with confidence.

Don’t – refinance for the wrong reasons

It can be really tempting to accept a loan deal that seems too good to be true, especially if it’s the first deal you find. Unfortunately, some lenders’ deals aren’t as competitive as they might first appear.

Honeymoon rates are some of the lowest rates you’ll come across during your refinancing research. But there’s a catch. This low rate only applies for a limited time, meaning you might be paying a similar (or higher) rate than the one on your current loan once that period is over. It’s a smart idea to learn how much you’ll actually be paying when the honeymoon period ends.

The competing lender might also give you an exclusive offer to hook you in. For example, they might offer a cashback up to a certain amount if you refinance with them. But you might end up with a higher rate than your previous lender.

Do – understand your goals and current financial situation

Take a moment to look at your current home loan and interest rate. For instance, is the interest you’re paying negatively affecting your financial goals? By understanding your current loan, you can decide if it’s actually working for you.

If you think your loan isn’t helping you achieve your goals, it might be time to refinance. Knowing your ‘why’ can help you find the ideal new loan, and lender, that will support your specific needs.

And if you’re still unsure if refinancing is for you, here’s a list of common reasons why people refinance a home loan:

  • To get a better interest rate that helps you save money.
  • To access new features on your loan, such as flexible payments and free redraw.
  • To access the equity in your home to renovate, travel or invest.
  • To consolidate your debts into one monthly repayment rather than multiple ones to manage your money better.

Don’t – submit loan applications to lots of lenders

Submitting multiple loan applications to different lenders might seem like a good idea to cover all your bases. You might think it can boost your chances at securing a better deal. But applying to refinance multiple times can have a negative effect on your credit score.

Why? Well, each time you apply, your lender will conduct an enquiry on your credit report. Having too many enquiries in a short period can be a red flag to lenders, so it’s important that you do your lender research first before refinancing.

Do – research your refinance options

Like with a lot of things in life, each type of home loan has its pros and cons. Whether it’s the loan features, interest rate or repayment options, researching the different loan types can help you understand what’s available. You can do your research on your own. Alternatively, you can talk to your lender or broker about your refinancing options to help you save time and money down the track.

Here are three things that you can investigate during your refinancing research:

  • Interest rates – How will your new rate compare to your current one?
  • Features – What features does your new loan have that your current one doesn’t?
  • Costs – What are the costs to refinance and are there any ongoing fees? Do these outweigh the benefits of refinancing?

With so many home loan comparison websites out there, it’s easier than ever to research and compare. And if you want to see how much you can change by switching loans, you can use our home loan refinance calculator.

Don’t – forget about the costs involved

There are some costs involved with refinancing that can put a lot of homeowners off from switching loans. Take the time to work out what you might have to pay as part of this process. You can chat to your lender or broker about the specific costs that are involved so you feel fully prepared.

As a starting point, some of the costs you might encounter include:

  • Discharge costs
  • Break fees
  • Loan application fee
  • Title search fee
  • Property valuation

You’ll also need to work out if you have enough equity to refinance so you can avoid Lenders Mortgage Insurance (LMI), as changing lenders without enough equity can become costly.

Do – consider the features of your new home loan

Every lender is different – and so are the features they offer on their home loans. Compare the different loan options that are available and see which features can benefit you the most.

At Great Southern Bank, we have many clever home loan features that our customers find useful, which include:

  • Unlimited extra repayments on our variable home loans free of charge, and up to $30,000 on fixed loans1
  • Free redraw on all our loans2
  • Flexible repayment options, such as paying every week, fortnight or month
  • No annual or monthly fees
  • The ability to switch loan and repayment types
  • The Boost, which allows you to pay off your loan every time you spend3

Don’t – go for the longest loan term

When you refinance, you might be able to change your loan term. If that’s the case, then you can carry over the remaining term on your current loan to the new one. You might also avoid paying any additional interest too, which can be a help you pay less over the life of your new loan.

More from the refinance hub

Discover the property investment essentials that all beginners need to know.

Why you might refinance your home loan

Is refinancing your home loan the right thing for you? There are many reasons why you might refinance your home and you can learn about them in our article.

Read more
Which refinancing option is right for you?

With so many different refinancing options out there, it might be tricky to pick the right one. But fear not – we explain the different options in our article.

Read more
Cost of refinancing your home loan

Refinancing often means you can get a sweet deal on your interest rate. But how much does it cost? We break down the cost considerations to factor in, so you know if it's worth it.

Read more
Switch to a better home loan
  • The Boost can help you pay off your loan as you spend3
  • Fee-free extra repayments
  • Free redraw2
  • Flexible repayment options

Explore your home refinancing options

Basic Variable Home Loan
Discounted rates from
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Owner occupier, principal & interest. Includes discount on new and additional lending, LVR 70% or less. Minimum loan amount applies.1,2,3
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Important Information

Rates are current as at 9 June 2024 and subject to change.

This is general information and does not take into account your objectives, financial situation or needs. Consider the appropriateness of the information, including the Terms and Conditions (T&Cs) booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.

Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence 238317. Lending criteria, limits, conditions, and fees apply. Applications are subject to credit approval.

1 A daily transfer will refund any amounts paid in advance in excess of the total advance repayments allowed during the fixed rate period ($30,000) unless sufficient to pay out the loan in full (in which case an Early Payout Cost may apply). Excess funds will be transferred to the nominated deposit account, which must remain open for the fixed rate period.

2 A $200 minimum withdrawal amount applies for redraws conducted in-branch.

3 The Boost is not available on business accounts.

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