How to Refinance a Home Loan in Adelaide

Looking to refinance your home loan in Adelaide? The short answer is that refinancing can be worth it when the savings from a lower interest rate outweigh the costs of switching, but the right move depends on your circumstances and your lender’s criteria. Refinancing means replacing your existing home loan with a new one, either with your current lender or a different one, usually to chase a lower rate or features that suit you better. This guide walks Adelaide and wider South Australia homeowners through how it works, the costs to watch, and how to check whether a switch stacks up for you.

This is general information only. The work here draws on the Australian Securities and Investments Commission’s Moneysmart service, the government’s independent money guidance.

What it means to refinance a home loan in Adelaide

Refinancing is the process of moving your home loan to a new loan. An Adelaide homeowner might refinance to get a lower rate, switch from a variable to a fixed rate, unlock features such as an offset account, or consolidate debt. Our refinance home loans hub sets out how the process works from start to finish. According to Moneysmart’s guide to switching home loans, there can be a difference of more than 2 percentage points between variable home loan rates on the market. That means the loan you took out a few years ago may now sit well above what is available today, whether you are in the Adelaide Hills, the inner suburbs, or regional South Australia.

The mechanics of a refinance are the same across the country, so a refinance in Adelaide follows the same path as a home loan refinance in SA more broadly. What changes from person to person is the maths: your loan balance, your current rate, the fees involved, and how long you plan to keep the property.

Should you refinance? Ask your current lender first

Before you go anywhere, it is worth asking your current lender for a better deal first. Lenders will sometimes match or beat a competitor rate to keep your business, and a phone call costs nothing. If they will not move, that is your signal to compare what else is available. This single step can save the cost and effort of a full refinance.

The costs that can erode the benefit

Switching is rarely free. The Moneysmart switching guide lists several costs that can apply when you refinance. These need to sit beside the rate before you decide, because the cost of switching can outweigh the savings from a lower rate.

If you are on a fixed rate, leaving the loan early can trigger a break fee, which can be substantial and is set by your lender based on market conditions at the time. Break costs are a common reason a refinance that looks good on paper may not stack up, so always ask your lender for a figure in writing before you commit.

Lenders mortgage insurance and your equity

Lenders mortgage insurance, or LMI, is a one-off cost a lender may charge when you borrow a larger share of the property value. If you have less than 20 per cent equity in your home when you refinance, you may have to pay it again, even if you paid it on your original loan. That can change the maths considerably. It is worth checking your loan-to-value ratio before you start.

Our guides on how to avoid LMI and what is LVR explain how lenders work this out.

How to refinance your home loan, step by step

The Moneysmart guidance sets out a sensible order to follow before you switch. Working through it in order helps you avoid switching to a loan that costs you more once the fees are counted.

The loan-term trap

A lower rate does not automatically mean you pay less interest overall. If you stretch the loan back out to a fresh 25 or 30 year term, you can increase the total interest you pay over the life of the loan, even at a lower rate, because you are paying it off over a longer period. To keep the full benefit of a lower rate, you can ask the new lender to match your remaining term, or keep your repayments at the old level so the extra goes straight onto the principal. The choice depends on your circumstances and lender criteria.

When refinancing in Adelaide may be worth it

Refinancing tends to make sense when several of these are true for your situation:

• Your current rate sits well above the market and the gap is more than a small fraction of a percent.
• You have enough equity, ideally 20 per cent or more, to avoid paying lenders mortgage insurance again.
• You plan to keep the loan past the point where the monthly savings cover the switching costs.
• You are not locked into a fixed rate with a break fee that wipes out the savings.
• You want a feature your current loan does not offer, such as an offset account or the ability to make extra repayments.

The Reserve Bank of Australia, or RBA, reviews the cash rate across the year, and that can move variable home loan rates. A rate that looked competitive last year may not be today, so it is worth reviewing your loan every year or two even if nothing has changed for you. You can read more on this in our comparison rate explained guide.

How to check the numbers

You do not have to do this by hand. The Moneysmart switching guide recommends using a calculator to weigh the savings from a lower rate against the upfront costs of changing loans. Start by checking whether your current rate is still competitive, then test the gap against the switching costs.

Talk it through with the team at Finance Lab

Whether a refinance in Adelaide is worth it always comes down to your own numbers, your equity, and your plans for the property. If you would like a hand running the figures and comparing what is available against your current loan, the team at Finance Lab can walk you through it. Outcomes depend on your circumstances and lender criteria.