switch home loans

Can You Switch Lenders When You Switch Home Loans in a Refinance?

Considering refinancing your home loan? If you are, then you should know that you will switch home loans when you do this. Refinancing is, after all, the act of replacing your current mortgage or loan with another, essentially giving you a fresh start on your loan. Although it might seem daunting, switching home loans can lead to more favourable terms.

Now, one common question arises when a refinance is considered: should you switch lenders? As it turns out, you can, although it isn’t always necessary to do so. Note, however, that more often than not, you will find yourself switching from one lender to another, and for a lot of good reasons.

In this blog, we’ll explore the pros and cons of switching home loans and lenders when refinancing. Our expert team of brokers will also provide some practical advice to help you make an informed decision that’s right for your personal finance situation.

Why Should You Switch Home Loans?

A lot of Australian homeowners have already chosen to refinance their mortgages. According to a recent report in the Australian Financial Review, 452,025 Australian home loans were refinanced in 2023, an increase of over 11%. What caused so many mortgage holders to refinance their loans?

The upswing in refinancing was largely caused by the Reserve Bank of Australia’s series of rapid cash rate hikes, which have impacted home loan repayments. As the transmission of interest rate rises to variable mortgage rates continues to take larger chunks of income away from mortgage-bearing households, refinancing and loan renegotiation is going to be the logical course of action for many.

To better illustrate how refinancing can benefit borrowers, a household carrying a $500,000 variable rate mortgage is now dealing with an increase in repayments of 45% from 2021 — costing them around $1,000 per month in additional mortgage repayments!

When these rate hikes are coupled with rising inflation and the growing cost of living, it’s no wonder so many homeowners are switching home loans from one bank to another. If you’re one of those currently experiencing mortgage stress, then don’t worry, it’s not too late! Refinancing your home loan may allow you to take advantage of competitive mortgage deals from a wide range of lending institutions.

Talk to your lender or mortgage broker (that’s us!) for more guidance on how you can take advantage of the latest refinancing deals.

What Are the Benefits of Switching Home Loans From One Bank to Another?

“Can I switch mortgage lenders?”

While many mortgage holders appreciate the benefits of refinancing, a surprising number of homeowners aren’t aware that switching home loans from one bank to another is an available option.

So, should you change home loans from one lender to another? Below are just some of the reasons why switching home loans to a different lender might be a very good idea:

1. Lower Interest Rates

switch home loans to lower interest rates

It’s common for banks to offer new customers lower home loan interest rates than what they’re currently paying with their existing lender. Banks actively compete with each other for new customers, and one way they do this is by offering lower interest rates or other benefits to entice customers to switch home loan offers.

At the same time, most banks will not offer the same low interest rates to their existing customers, even if they’ve been with that lender for a long time. This is what’s commonly known as paying a “loyalty tax”. Loyalty tax is the higher amount of interest that loyal customers may be charged by their bank, compared to the interest rates being offered to new customers.

2. Better Loan Features

Another reason to consider switching is that a new lender might offer better home loan features. These could include more flexible repayment options, lower fees or other benefits that better suit your needs (such as a redraw facility or offset account). By shopping around and comparing different lenders, you could find a refinancing option that provides better overall value and benefits compared to your current loan.

3. Better Customer Service

Life is too short to deal with bad customer service. It is important to have a good relationship with your lender, and if you are not satisfied with your current lender’s customer service, then it may be worth considering switching to a lender who treats you better.

A lender with better customer service can make the loan process easier and more pleasant. But don’t forget to also consider the interest rates, loan features and fees associated with the new loan – you don’t want to end up paying more!

4. Improved Online Banking

In today’s hectic world, the ability to manage your home loan through online banking facilities is an enormous convenience. If your current lender doesn’t offer online banking (or has limited online facilities), then it could be worth switching home loans to a new lender. With improved online banking access, you can:

  • Manage your mortgage from anywhere in the world, 24/7, without the inconvenience of having to visit a bank branch. With online banking, you can view your account balance, make payments, and monitor your mortgage activity at a time that suits you.
  • Get real time updates on your account activity, so you can see your payment history, interest charges and principal balance in real-time.
  • Make mortgage payments quickly and easily.
  • Have the peace of mind that comes with knowing advanced encryption technology is protecting your personal and financial information whenever you log in to your online banking account.

5. Refinance Cashback Offer

Some lenders offer refinance cashback offers to borrowers who are willing to switch home loans. These cashback deals range in value from $500 up to $10,000! A lucrative cashback rate can deliver immediate financial relief for many, as the money can be used to offset the initial refinancing costs, pay off other debts or for necessary home improvements.

However, it’s important to carefully consider the overall cost of refinancing the loan vs. the cashback being offered. It’s also important to read the fine print of any cashback offers to ensure you fully understand the terms and conditions (as some may have restrictions or limitations).

When Can I Change Home Loans?

knowing when to switch home loans

You can switch home loans to a new lender at any time. However, you may have to pay fees and penalties if you break your existing mortgage agreement before the term ends. The specific rules and penalties can vary depending on the terms of your existing mortgage and the regulations in your jurisdiction.

It’s a good idea to regularly review your mortgage contract and consult with a financial advisor or mortgage specialist to determine if and when it makes sense to switch lenders. If you’re currently stuck with a high interest rate or an unsuitable loan structure, then the upfront cost of refinancing may be worth the long-term savings.

If you’re unsure whether now is a good time to change home loans, why not talk to an expert? At ZEP Finance, our brokers offer free mortgage assessments that can determine whether now is a good time for you to consider refinancing.

How Do I Switch Home Loans?

Switching home loans to a new lender can be a complicated process because it involves quite a few steps. To simplify this process and ensure a smooth transition, it’s a good idea to work with a mortgage broker.

Step 1: Assess Your Current Loan

Begin by reviewing your current home loan, so you understand its interest rate, terms and any associated fees.

Step 2: Research New Lenders

Compare loan products offered by different lenders. Consider interest rates, loan features, repayment options and customer service.

Step 3: Complete an Application

Once you’ve chosen a lender and a loan product, you’ll need to fill out an application. This involves providing financial information and a range of other documentation to the lender for assessment and approval.

Step 4: Review Loan Terms

Once your loan is approved, carefully review the loan terms and conditions provided by the new lender. Ensure you understand all aspects of the loan, including interest rates, fees and repayment obligations.

Step 5: Sign Loan Documents

Sign the loan documents provided by the new lender. Your broker can guide you through this process and ensure everything is in order.

Step 6: Notify Current Lender

Inform your current lender of your intention to switch loans. They will provide a payout figure, which includes any outstanding balance, fees and charges.

Step 7: Settlement

Coordinate with your broker and the new lender to finalise the settlement process. This usually involves transferring the funds from the new lender to pay off your existing loan. Once the funds from the new lender are received, your broker will ensure that your previous loan is paid off in full and your account closed.

Step 8: Start Making Repayments

Begin making repayments to your new lender according to the terms of your new loan.
Using a mortgage broker streamlines this process, saving you time and potentially money. At ZEP Finance, we can help you compare lenders, negotiate rates and guide you through the entire refinancing process. We’ll even handle the paperwork for you!

Ready to Switch Home Loan Offers? Talk to ZEP Finance

Ready to make the switch and save? Let ZEP Finance guide you through the process. When it’s time to switch home loans, our expert brokers streamline the process, ensuring you secure the best deal for your needs. Contact us today to start your journey towards better home loan options.

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