Home Loan Refinancing: Ask yourself these questions first

Home Loan Refinancing: Ask yourself these questions first

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  How much can I borrow?  |    How much money could I save?  |    Debt consolidation


There are many reasons someone might refinance their home loan. Perhaps you need a bit of extra cash to finance a much-needed renovation, or you’ve seen some enticing offers advertised and feel like you might be missing out.

Depending on the product you choose, refinancing your home loan could help you save on mortgage repayments, access the equity accrued in your property or consolidate debts. But before switching products or lenders, here are five questions to ask yourself first:


Why do I want to refinance?

It’s important to have a clear view of the reasons why you want to refinance your home loan before you start. Is it to finance an investment property, consolidate other debts or release equity to undertake renovations?

Or is there simply a product out there that might better meet your needs? Have a clear understanding of your personal motivation, research widely to find loans with the features you’re looking for, and make sure you read the T&Cs of the products you’re considering - some may have restrictions on the use of certain features e.g. ‘cash out’.

How much can I afford to borrow?

How much can I afford to borrow?

Start by working out how much you need for whatever your reason for refinancing is, remembering you need to be able to pay it all back comfortably. Next, gather some information on your regular income, expenses, and how much equity you’ve got in your current property.

Using a borrowing power calculator, you can work out:

  • Whether refinancing is an option for you;
  • If it is, your maximum borrowing capacity; and
  • What your new monthly repayments might be.

This could be handy to re-visit if your income has changed significantly since you took out your initial mortgage.

How much money could I save over the life of my home loan?

Considerations for home loan refinancing

Once you know how much you can and want to borrow and you’ve got a few products in mind that meet your needs, use a repayments calculator to check the impact of the associated interest rate and loan term. Keep in mind though that these calculators provide an estimate only, and generally do not take account of all fees and charges associated with the loan. Ensure you refer to the comparison rate of any loan product you review for a clearer indication of the true cost of a loan.

Using a repayments calculator will also help you check the impact of extending the life of your loan, if that is something you’re considering.

Do I want to consolidate other debts into this loan?

Do I want to consolidate other debts into this loan?

Consolidating outstanding loans could be a good way to save on interest, as having to pay multiple (often higher) interest rates can really add up. It could also reduce the number of monthly repayments, which can make making repayments on time easier to manage. Make sure you read all your existing loan information to make sure you know and factor in any break costs for the loans you’re thinking of consolidating.

A word of caution though – if you have a large credit card debt, remember that refinancing isn't a magic way to ‘fix’ your spending habits. 

What are the upfront and ongoing fees?

What are the upfront and ongoing fees?

It’s always critical to double-check the fine print before signing anything. Make sure you understand all the fees for refinancing your home loan, and check whether they need to be paid upfront, or will be deducted monthly or annually with your repayments. 

Whilst the comparison rate can help give you’re a clearer picture of the true cost of a loan, it’s important you consider that there could be other fees associated with refinancing, as well as potential discharge or break fee on your old loan.

Having answered all of the above, weigh up all the factors concerning the loan you were considering refinancing to, and make an informed decision - will refinancing help you reach your goals?

Keen to know more? Your home loan is likely to be one of the biggest financial commitments you’ll make. Read our Ultimate Guide to Refinancing and decide if your home loan still works for you. 


Want to see what a Pepper Money home loan might look like for you?

Try our Home Loan Repayment Calculator

digits only, min-5000

digits only, min-1 year, max-30 years

digits with two decimals only

With a repayment frequency of:

Please select frequency


Important Information

This repayment calculator gives you an estimate of what your home loan repayments could be, based on information you have provided in the calculator. The calculator does not take into account loan establishment or application fees, nor government statutory or lender fees.  It is to be used as a guide only and does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it.


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