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Refinancing home loan

Refinancing Your Home Loan
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Tips for Successfully Refinancing Your Home Loan

Unlock the secrets to secure mortgage refinancing approval, even in a climate of rising interest rates. As interest rates continue to climb in Australia, lenders have become more cautious and selective when approving mortgage applications.

Many borrowers find themselves unable to refinance to a better rate due to higher assessment hurdles imposed by lenders.

However, there are simple yet clever strategies you can implement to increase your chances of getting your refinance mortgage application approved.

In this article, we will provide you with our best mortgage brokers Melbourne‘ tips to navigate the refinancing process, ensuring you secure a better interest rate for your home or investment loan, as part of your overall mortgage advice.

Successfully Refinancing Your Home Loan


Review Your Credit Score

To improve your chances of mortgage approval, it’s crucial to have a solid credit score. Assess your credit report for any errors that may harm your score. Actions like late loan repayments, excessive credit applications, frequent address changes, or multiple consumer debts can negatively impact your credit rating.

Prioritize improving your score before applying for a mortgage.

A refinance mortgage broker can provide assistance in the process of reviewing your credit score. They have the expertise to guide you in understanding the intricacies of your credit report, helping to identify any inaccuracies or areas that may require improvement.

Demonstrate Stable Income

Lenders seek evidence of a stable income to ensure your ability to handle mortgage payments, particularly with rising interest rates. Provide thorough documentation of your income, including pay stubs, tax returns, and bank statements.

Note that certain lenders may consider bonus income, but it’s best to consult with professionals to understand your options.

Reduce Debt

Your debt-to-income ratio plays a significant role in mortgage approval. If your ratio is high, it may raise concerns for lenders. Consider paying off debts or reducing credit card limits before applying for a mortgage.

Even a slight reduction in your credit card limit can substantially impact your loan. Currently, most lenders prefer a debt-to-income ratio below six times. When refinancing, it’s crucial to strategise on how to avoid Lender’s Mortgage Insurance (LMI); a common method is ensuring that your loan does not exceed 80% of your property’s appraised value.

Explore Different Lenders

Various lenders have unique requirements and criteria for approving mortgages. It’s wise to explore multiple lenders, comparing rates and terms to find the best fit for your financial situation. Seek the expertise of experienced mortgage brokers to navigate this process effectively.

Pro Tip: Be Prepared for Additional Documentation

Due to current practices, banks and lenders may request additional documentation during the application process. Stay prepared to provide this information promptly, ensuring a smoother and faster approval process.

Explore Different Lenders


Consider Loan Term Extension

Extending your loan term can increase your borrowing capacity, but it may also result in higher overall costs. Exercise caution when considering this option, especially if you are already several years into a 30-year mortgage. Consulting with a seasoned mortgage broker will help you weigh the pros and cons effectively.

When it comes to managing your financial future, choosing to refinance a home loan can offer a host of benefits.

If you’re unhappy with your existing home loan, grappling with high interest rates, or seeking to make use of your home’s equity, refinancing can be a game-changing decision.

Understanding Interest Rates: Fixed vs Variable

In the arena of home loan refinancing, the choice between a fixed rate loan and a variable interest rate loan is crucial. While a fixed rate home loan offers the stability of steady loan repayments, a variable rate home loan may present the opportunity to benefit from a fluctuating market.

With the right professional financial advice, you can switch between these options to maximise your savings and align your loan features with your financial needs.

Understanding Interest Rates


Assessing Your Home’s Equity

The process of refinancing your home loan begins with understanding how much equity you have in your property. Your property’s value, less your loan balance, will determine your home equity.

If your property value has appreciated, refinancing can help you unlock this increased equity to fund home improvements, an investment property or consolidate your car loan and personal loans into your home loan.

Navigating the Costs of Refinancing

The road to a successful home loan refinance isn’t without its tolls. Understanding the costs involved in refinancing, including break costs, lenders mortgage insurance, and the mortgage registration fee, will help you make an informed decision.

Refinancing may also involve a valuation fee and legal fees charged by your new lender, while your existing lender might charge an exit fee or discharge fee.

Leveraging Refinancing for Debt Consolidation

One of the reasons people refinance their home loans is to consolidate their debts. By folding your car loan or personal loan into your home loan, you can potentially secure a lower interest rate and reduce your monthly repayments.

The power of debt consolidation through refinancing lies in simplifying your financial commitments and potentially saving money over the life of your loan.

Enhancing Loan Features Through Refinancing

Refinancing can also provide an opportunity to reassess the features of your loan. Whether you’re looking to make extra repayments, utilise an offset account, or arrange a repayment holiday, refinancing gives you a chance to tailor your loan to your personal needs.

A Refinancing Checklist

Finally, before embarking on the refinancing process, it’s critical to assess your current loan against the potential benefits of a new loan. Consider the average interest rate of eligible home loans, the break fees if you’re within a fixed rate period, and the ongoing fees charged by different lenders.

At MelFinance, our job is to make the path to refinancing smoother, guiding you through each step and empowering you to make decisions that help you achieve your financial goals.

By providing you with comprehensive information about refinancing home loans, we put the control back in your hands.



Refinancing: A Simple Analogy

Think of refinancing your home loan like renovating your house. Just as you’d change your living arrangements to better suit your lifestyle – perhaps by creating an open plan living area or adding an extra bedroom – refinancing allows you to tailor your home loan to better suit your financial situation.

Just as every house renovation requires careful planning, attention to detail, and professional help, so too does the process of refinancing. And, much like how the finished renovation can provide a better living environment, a successful refinance can provide a more comfortable financial future.

Refinancing Checklist

Better Loan Settlement

A successful loan settlement marks the completion of your refinancing process, enabling you to start afresh with your newly structured home loan. Obtaining loan approval is a critical step in the journey towards home ownership or refinancing an existing home loan.

Remember, the goal is not just to change your loan, but to change it for the better!

Refinancing your home loan is a significant financial decision that requires careful consideration of various factors. Refinance a home loan means taking a new loan to pay off your existing loan, ideally aiming for a lower interest rate or more favourable terms. While it’s possible to refinance with your current lender, many homeowners often seek a new lender who can offer better terms.

Evaluating your current loan

The home loan refinancing process involves evaluating your current loan, especially if it’s a fixed rate loan. Fixed rate home loans offer the security of consistent monthly repayments but may have break costs associated with early termination. Conversely, variable rate home loans fluctuate with market interest rates but usually allow for extra repayments without incurring early repayment fees.

Before you decide to refinance, examine your loan balance, interest repayments, and the repayment frequency of your existing loan. Moreover, consider the potential break fees from your current lender and the settlement fee for the new loan from the new lender or financial institution.

Understand the difference between your home loan’s fixed and comparison rates. While the fixed rate is the interest charged on your principal, the comparison rate also includes the cost of fees, providing a more accurate picture of your loan’s cost.

Also, remember to check the home loan’s fixed and variable interest rates. Switching home loans could involve moving from a fixed rate home loan to a variable rate one, or vice versa. In a fixed rate mortgage, your interest rate and mortgage repayments stay constant, whereas variable rate home loans can change based on market conditions.

When you refinance your home loan could involve paying off a personal loan and other debts, which would consolidate your monthly repayments into one. However, it’s crucial to consider whether the new loan’s long-term costs will save money compared to your existing loan.

Consider the potential for additional costs such as valuation fees, lender’s mortgage insurance if your loan is more than 80% of your property’s purchase price, and exit fees charged by your existing lender. Some loans also offer features such as an offset account, which can reduce the interest paid on your loan and help you pay off your loan sooner.


Refinancing your home loan amidst rising interest rates requires careful planning and preparation. By following these tips, you can boost your chances of obtaining approval for the refinance and secure a more favorable interest rate. Contact us today to explore refinancing options and seize the opportunity for a better rate.


How can I improve my chances of mortgage approval?

Enhancing your chances of mortgage approval involves several steps. First, review and improve your credit score by ensuring there are no errors in your credit report and addressing any negative factors. Second, demonstrate a stable income by providing documentation such as pay stubs, tax returns, and bank statements. Third, work on reducing your debt-to-income ratio by paying off debts or lowering credit card limits.

Fourth, shop around and compare rates and terms from different lenders to find the best fit for your financial situation. Finally, be prepared to provide additional documentation promptly during the application process.

Should I extend my loan term to increase borrowing capacity?

Extending your loan term can potentially increase your borrowing capacity; however, it’s important to consider the long-term implications. While it may offer short-term benefits, extending the loan term can result in higher overall costs over the life of the mortgage.

To make an informed decision, it’s advisable to consult with a knowledgeable mortgage broker who can assess your specific circumstances and provide tailored advice based on your needs and goals.



Lumbini Wekunagoda

Lumbini Wekunagoda

Lumbini marries practical insights with solid financial knowledge to craft tailored solutions. Lumbini has a diploma in Mortgage Broking, a Certificate IV, a supplementary Diploma in Mortgage Broking and Finance, and an MBA from the prestigious University of Wales. As an ASIC registered , licensed Mortgage Broker (CRN:444210), Lumbini upholds the highest standards of professionalism and ethics, aligning his practice with the Mortgage and Finance Association of Australia (MFAA).

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