How much can you save by refinancing your home loan?

“Refinancing is the most underused side hustle in Australia,” claims Andrew Wheatley, founder of Melbourne-based brokerage firm Wheatley Finance.

“If you have a mortgage and you're not exploring refinancing at least every two years, you are leaving money on the table.”

It’s a bold claim, but one more and more Australians are interested in exploring, particularly given the rising cost of living and soaring interest rates.

Can refinancing save you money?

There are two main ways that refinancing can save Australian borrowers money, explains Mr Wheatley. The first is savings on repayments made by getting your rate reduced, and the second is by accessing a cashback bonus from the new bank for moving.

“The one thing you need to realise that will change how you deal with banks forever is this,” Wheatley says, “banks treat new clients much better than existing clients. If you believe that is true you then need to figure out how to be on the right side of the system by becoming a ‘new client’, then having a process in place to regularly become a new client at the right times.”

“The average Australian mortgage stays with a bank for seven years,” he continues, “and I would strongly argue that should be only two to three, maximum, for most Australians.”

How can refinancing save you money?

“New clients typically get lower rates and, often, cashback offers,” he says.

“Existing clients often pay higher rates and get no cash. Banks know people do not like doing mortgage applications, so they offer their best deals to entice people to move. It's a fight you'll never win.”

Wheatley suggests partnering with a mortgage broker who understands the above, and can advise on options that would benefit you in a refinance.

“This way, you take control,” he says.

Are there other benefits to refinancing aside from saving money?

Mr Wheatley says it’s not only lower rates and cashback offers that can offer big rewards when looking at refinancing a loan.

“Refinancing with an experienced professional is a good chance to check that your loans and bank accounts are set up correctly as well, which can be a big help,” he says.

“It’s important to have a way to properly compare different offers and not focus on just the lowest rate or the highest cashback, but the combination that works best for you. Fortunately there are usually a few banks at any time that are blatantly trying to buy market share and offer a large cashback with a low rate. This is the sweet spot to look for.”

Compare home loans to refinance

Mr Wheatley is passionate about the ability of refinancing to save consumers money, and for good reason.

“We tracked our last 50 refinance loans for clients and found the rate reduction ranged from (an estimated) 2.88 per cent to some clients who moved for the same rate and just wanted a $4000 cashback,” he explains.

“The average rates saving was .36 per cent. If we say that the difference between being a "new" versus an "existing" client was .36 per cent, as well as any potential cashback offer (which can range from $2000 to $5000 in some cases).”

What to consider before deciding to refinance your home loan

Wheatley urges consumers thinking of taking the leap into refinancing to take everything they read and hear as general advice only.

“I'd highly recommend then speaking to an experienced mortgage broker who can give specific advice based on your situation, which will include things like: keeping your loan term the same so you don't accidently push your mortgage back out to 30 years; whether a fixed, variable or combination of both is suitable for you; and which banks will approve you so you don't waste time applying to the wrong banks.”

Can I refinance on my own without the help of a broker?

“Refinancing your mortgage is something most people can do on their own and get some benefits,” says Mr Wheatley.

“In fact, the main reason to use a broker is simply that, while you might have the best of intentions to refinance more regularly, the reality is that life is busy and it can often get put on the backburner.”

“A lot of people put off refinancing because of the pain of moving bank accounts and changing their payroll and direct debits” he continues.

“If you’re planning to move banks more regularly, a broker who understands this would tell you not to move your bank accounts, just move your savings to the new offset or redraw account and do your day-to-day banking where it is already set up and working smoothly – why make it hard on yourself?”

Mr Wheatley says finding a broker you can easily talk to and trust means you can then pass the responsibility to them to review your mortgage once a year.

“[An experienced broker can] fight with the existing bank if the rate is too high but then also show you what the best options are to refinance, and if you decide it is worth it then they do most of the work,” Wheatley says.

It's like if you could outsource someone else to go to the dentist for you, then you would go more often and have less fillings!”