Is this my cue to refinance my home loan?: Lowest interest rate during COVID-19

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With the Reserve Bank of Australia (RBA) announcing its target to keep the cash rate at the lowest recorded level of 0.10%, refinancing during COVID-19 sounded very much like a magic bullet to reduce your expenses, especially if you are in a difficult financial situation during this pandemic.

Currently, the low interest rates in Australia have prompted financial institutions to introduce new low home loan interest rates. Before you impulsively opt to refinance your home loan, here are a few questions you need to ask yourself:

  • Am I eligible to refinance?
  • How can I refinance?
  • Are there any additional charges to refinance?
  • What documents do I need to apply for a refinance?

Am I eligible to refinance my home loan?

Yes, as long as you are:

  • 18 years old and above
  • An Australian citizen or permanent resident (PR)
  • Employed - or self-employed

Use our refinance comparison tool to help you in finding a new provider to refinance your loans.

How can I refinance?

Rate-and-term Refinancing
One of the most common ways to refinance is rate-and-term refinancing, you can choose to either alter the interest rates of your home loans or your loan term or both. The main purpose of doing so is to reduce your overall expenditure when servicing your loans.

Cash-out Refinancing
If you are seeking to generate liquid cash in a relatively short time, you can also do so by refinancing your home loans. This method is called the cash-out refinance. Fundamentally, you are taking out a bigger new loan to pay your existing loan and cash out the remaining. Some people may choose to do so when they wish to consolidate all their loans.

Cash-in Refinancing
When there is cash-out, there is also cash-in refinance. It is essentially an option to reduce your cost to pay the mortgage insurance premium (MIP) that applies when your loan is higher than 80% loan-to-value (LTV). If you wish to shorten your loan term, then you might want to consider this option.


Photo by Kelly Sikkema / Unsplash

Are there any additional charges to refinance?

Low interest rates mean it is now cheaper for you to serve your home loan. However, if this is the sole reason for you to refinance, then consider taking a step back and reevaluate it is necessary for you to refinance.

Typically, these charges do apply during the refinancing process:

  • Application fee: Charged by your new provider when you apply for a new loan
  • Valuation fee: Charged by your new provider when your property is assessed for the new loan
  • Break fee: Charged by your previous provider if you chose to refinance before the end of the fixed term
  • Discharge fee: Charged by your previous provider to cover necessary legal costs to transfer your loan to your new provider
  • Lenders Mortgage Insurance (LMI) is applicable if you do not meet the 20% deposit threshold

The terms and conditions vary from provider to provider, please talk to your provider, or a trusted mortgage broker, for more information.


Photo by Cytonn Photography / Unsplash

I really want to refinance, can I apply for one now?

Applying for a refinance is very similar to applying for a new home loan. Before you apply for a refinance, make sure to keep these documents handy:

  • Personal identification to prove your identity
  • Your recent payslip to prove your income sources; if you are self-employed, you can submit your most recent individual tax return statement issued by the Australian Taxation Office (ATO)
  • Your recent utility bills and credit card statements showing your regular expenses
  • A credit report or credit score to show your personal assets and liabilities
  • The information for your existing loan that you wished to be refinanced

For more information, please consult someone trustworthy or refer to our home loan documents checklist to help you.

I'm still unsure if I want to refinance, what should I do?

We understand that at tough times like this, every dollar counts and it is easy to understand why refinancing is increasingly popular for borrowers like you. Here at Benevolence Financial Group, we are always ready to offer you our help and provide you with options on how to refinance your debts, at absolutely zero-cost.

Contact us today to know if refinancing is for you.

Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.

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