Switching home loans: tips for borrowers looking for a better deal

Borrowers may be able to save by switching home loans for a better rate through their current lender or by changing lenders. Here’s how to do it.

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Borrowers may be able to save by switching home loans for a better rate through their current lender or by changing lenders. Here’s how to do it.

Key points:

It is usually possible to switch a mortgage to another lender.
You could first try negotiating for a better interest rate with your current lender.
Check for the extra fees and costs associated with refinancing a home loan.

It could be possible to save money on your biggest expense by negotiating for a better rate from your current home lender. And if that doesn’t work, and you’re thinking about looking around for a better deal from a different lender, here are some points to consider.

Can you switch your mortgage to another bank?

Yes, it’s usually possible to switch a mortgage to another lender. Switching or refinancing your current home loan part-way through the loan term to another loan that better suits your needs could potentially save you money.

There are thousands of home loans available on the market. If you haven’t looked at your options recently, you may find that compared to your current home loan, one of them may offer:

a lower interest rate
lower fees
more flexible repayment options
better features

If you can find a home loan offering better value than your current mortgage you could consider refinancing. After all, why should you be paying more for the same sort of product you could find elsewhere?

Is it worth switching mortgage lenders and home loans?

Although there may be some refinancing costs to bear in mind – such as discharge and application fees – the savings earned by switching could negate these. It’s generally worth weighing up the costs to refinance against the savings you expect to make before making any concrete moves.

It is possible to break free from an existing fixed loan agreement, but some lenders may charge what is known as a ‘break cost’ or ‘break fee’ if an existing borrower wishes to end their fixed-term loan before the end of the contract to switch to a different rate or bank.

Of course, you don’t have to immediately switch to a different provider when looking for a better deal, you could first try negotiating for a lower rate with your current lender. But if they won’t give you a discount, it might be time to vote with your wallet.

How much could I save by switching home loans?

How much you could save depends on a range of factors, such as the interest rate and fees. To investigate for yourself, you could use Canstar’s Home Loan Comparison Calculator to check the impact of different interest rates on monthly mortgage repayments and total loan costs.

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How do you switch lenders? How do you transfer a home loan?

If you’ve decided it could be worthwhile to consider switching from your current home loan lender, here are some tips to help:

1. Compare interest rates

Firstly, know what’s on offer. Jump online and compare the refinance home loan rates that are available from various institutions. If you have at least 20% equity in your home, you may be in a position to get even more competitive rates (as you might not have to pay lenders mortgage insurance – LMI). It could also be worth looking at the loan features on offer from the various lenders to see if they are suited to your needs. You might also want to check your credit score, which lenders may use to help determine your creditworthiness and ability to refinance.

Explore: Home loan cashback offers & deals

2. Check what’s on offer at your bank

Phone your existing institution and ask them what discount they can offer you. If you know what you can get elsewhere, you’re in a position of power. You might find some sharp negotiation with your existing provider saves you the effort of moving.

Explore: How to haggle for a lower home loan rate

3. Weigh up switching to a new lender

If your existing provider won’t play ball, it could be time to consider switching your mortgage to a new provider. While changing your bank may seem daunting, it doesn’t have to be a difficult process – your new lender should be able to do most of the legwork for you.

4. Check for fees and extra costs

Check with the lenders on your shortlist whether there will be any start-up fees, break fees or other costs involved, and factor them in before you switch. If you have less than 20% equity, you might also be up for lenders mortgage insurance (LMI), which could make the cost of switching significantly less affordable. Your new potential lender will generally be able to tell you if any mortgage insurance will apply.

5. Calculate your break-even point

While a lower interest rate might mean you could save money on monthly repayments, the costs to refinance could actually mean it may take a while for any real savings to flow through. One way to calculate when this is to add up the costs of refinancing and divide that by the monthly savings you would make on repayments. As a hypothetical example, if it costs you $1,000 to switch to a new lender, but you expect to save $50 per month in repayments, it would take 20 months to break even. Remember, even if you refinance at a lower rate it could be worthwhile keeping your repayment amounts the same anyway to save more money in interest over the life of your loan.

6. Check the length of your new loan

The typical home loan term in Australia is 25 to 30 years, and some lenders will only let you take out a loan of this length, rather than the length remaining on your previous mortgage. For example, you might end up with a 25-year term rather than the 17 years you had remaining, which may result in you paying more in interest than you otherwise would.

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This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.

Mandy Beaumont

Content Lead, Canstar

Canstar’s Content Lead, Mandy Beaumont, has had a long career in the publishing and university sector as an award-winning author, journalist and creative writing academic. She’s been a course convenor in creative writing and communications at Griffith University for more than a decade, holds a PhD and a master’s in creative writing from RMIT and QUT respectively, and has written for The Big Issue, Melbourne Writers Festival, the Australian Council of Trade Unions the Queensland Nurses and Midwives’ Union, as well as many other well-known newspapers and journals in Australia and overseas. Mandy’s short fiction writing and her novels have won, been shortlisted and longlisted for prestigious prizes and awards such as The Stella Award, the QLD Literary Awards, the Richell Prize, the Dorothy Hewitt Award and the MOTH International Short Story Award. Mandy will have a new novel out with one of Australia’s largest publishing houses, Hachette Publishing in early 2025 called The Thrill of It. After many years of working with trade unions and renting, Mandy has a keen interest in superannuation (particularly worker’s capital) and the housing market in Australia.

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