If I don't like my new lender after I refinance, can I go back to my previous lender?

Struggling with refinancers' remorse? If you’ve switched home loan lenders but now realise you want to go back, you’ll likely need to begin the refinancing process all over again; if you’re on a variable rate home loan. This includes reapplying and paying a second set of discharge fees and upfront fees.

If you are on a fixed rate home loan, this may be challenging, as the break cost charged when you exit a fixed rate period early can be significant.

Before you refinance, it’s important to weigh up the new prospective lender against your current lender in a few key areas, including fees, flexibility, and the interest rate.

What happens if you refinance but want to go back to your previous lender?

Whether you switched to take advantage of a cashback offer or nab a lower rate, you may have decided that your old lender was better.

Unfortunately, if you’ve already paid your discharge fee and finished the settlement period, there is no way to undo what you’ve done without re-applying for the previous mortgage again.

• If you refinanced to a variable rate…

If you are on a variable rate home loan, you can immediately apply to your old lender, if you feel this is the best decision to make for your financial situation and budget. Just keep in mind that you will yet again need to potentially pay upfront fees, like an application fee, as well as a mortgage discharge fee with your new lender.

The downside is that you’ve likely just gone through this exact process and paid these exact fees already. The cost of refinancing depends on the lenders and their fees, but can easily climb from $500-$2000. This may mean that refinancing again immediately is just not possible for you financially. It’s important to be realistic about the cost of one home loan refinance, let alone two in short succession.

• If you refinanced to a fixed rate …

Unfortunately, if you refinanced to a fixed rate term, the cost of refinancing could climb even higher. Your new lender will likely charge you a costly break fee for ending your fixed period early. This isn’t a set dollar amount, but instead is calculated based on a few key factors.

According to Westpac, a break fee is calculated as the difference in wholesale interest rates since you first applied, multiplied by the remaining term in your fixed rate period, multiplied by the average loan account balance that would have applied.

It may be worth instead waiting until your fixed rate period ends before you consider refinancing again. Otherwise be sure to do your calculations thoroughly to ensure you can cover the cost of this fee in your budget. 

How to compare refinancing home loans

Before you commit to the switch, be sure to do your research around whether going back to your old home loan is actually the best choice for your financial situation and budget. After all, there was a reason you left that home loan. It’s worthwhile taking your time to compare the following factors:

• Interest rate – The interest rate is a considerable factor that affects the cost of your mortgage repayments. Ensure you’re choosing a lender that offers rates in a range you can comfortably afford while avoiding mortgage stress.
  
  
• Is it an introductory rate? – Speaking of rates, perhaps you refinanced to a competitive introductory rate, which then reverted to a much higher standard variable rate when this period ended. Be sure to compare the ongoing interest rate charged, not just the competitive ‘honeymoon’ rate a lender offers to entice you on to their books.
  
  
• Fees and costs – By now you should be more than familiar with home loan fees, so why pay even more than you need to? Compare the upfront fees, ongoing fees and exit fees associated with any home loan. There are many lenders that do not charge annual fees, for example, so it may be worth factoring this into your comparison.
  
  
• Features – Do you want to add helpful home loan features to your mortgage? You may want to consider comparing options that come with offset account(s), a redraw facility or the ability to make extra repayments.
  
  
• Cashback offers – Some lenders offer competitive cashback offers to new customers, which can help cover the cost of switching. If you’re going to refinance twice, it may be worth considering having a new lender help pay for this process via a generous cashback.

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