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Switching home loans is often referred to as refinancing. When you switch home loans you may be switching to a new lender. However, it’s also possible to switch home loans while remaining with the same bank or financial institution. You may be negotiating the terms and features of your mortgage agreement - seeking a lower interest rate or added features, such as those sometimes offered to new customers. In these instances some might say you’re not necessarily switching home loans but refinancing your mortgage. 

Therefore, it’s a matter of personal preference and circumstance as to whether or not you consider switching to be the same as refinancing. For the purposes of this article, we’ll consider switching home loans as changing providers and/or the terms of your mortgage.

Considering whether to switch home loans can be a big decision, and it's important to weigh various factors before making a choice that suits your circumstances.

Although you may have spent a long time finding the best terms available when you originally took out your loan, the market may have changed since then and it’s quite possible that another lender’s terms could now be better than those offered by your bank. What’s more, some lenders offer special terms and bonuses, such as cashback offers, to refinancers.

Switching home loan lenders can be a viable option in certain situations. Here are a few reasons why you might consider switching:

• Lower interest rates: One of the primary motivations for switching lenders is to secure a lower interest rate. Interest rates can vary between lenders, and if you find a lender offering a significantly lower rate than what you currently have, it could potentially save you a substantial amount of money over the life of your loan. Lower interest rates can mean lower monthly repayments or the ability to pay off your loan sooner.
• Improved loan features: Different lenders offer various loan features, and switching can give you access to options that better align with your needs. For example, you might be looking for a loan that allows you to make additional repayments without penalties, offers an offset account to reduce the interest you pay, or provides greater flexibility in terms of redraw facilities. Assessing the features of different lenders can help you find a loan that better suits your preferences and financial goals.
• Enhanced customer service: If you're dissatisfied with the level of customer service provided by your current lender, switching to a new lender can offer a fresh start. Some lenders prioritise customer satisfaction and provide excellent service, including responsive communication, efficient processing of loan applications, and ongoing support throughout the loan term. Researching and switching to a lender with a reputation for exceptional customer service can improve your overall experience.
• Debt consolidation: Switching lenders can be an opportunity to consolidate your debts. If you have multiple loans or credit cards with high-interest rates, refinancing your home loan can allow you to consolidate those debts into one loan with a potentially lower interest rate. This can simplify your financial management and reduce the overall interest you pay.
• Access to additional benefits: Some lenders offer additional benefits or incentives to attract borrowers. These benefits might include discounted insurance rates, fee waivers, or loyalty rewards program points. If a new lender provides enticing benefits that align with your needs, switching could be a way to take advantage of those perks.
• Change in financial circumstances: Your financial circumstances may change over time, and what suited you when you initially took out your home loan might not align with your current situation. Switching lenders can allow you to modify your loan terms, such as adjusting the loan term or repayment structure, to better accommodate your present financial circumstances.

There’s no exact science or specific time of year that’s ideal to switch home loans. As mentioned previously, changing your home loan product will depend on your personal financial circumstances and contract terms.

Whatever you’re shopping for, it’s often better to do it at a time when sellers are under pressure and are anxious not to miss out. This approach also applies to financial products. When the market is highly competitive for lenders - which roughly corresponds with slumps or delays in expected rises in the housing market, a sign that fewer people are borrowing - you may be able to get much better deals.

It pays to keep an eye on the market and the current offerings available. You can compare your options online using RateCity’s refinancing and home loan comparison tables. It’s also sensible to monitor the cash rate, in anticipation of changing variable interest rates.

It is possible to switch between a fixed-rate and variable-rate home loan. Whether you can switch from a fixed to a variable loan or vice versa will depend on your specific loan terms and the policies of your lender.

You may be subject to new application fees, valuation fees, as well as potential exit fees or break costs owing to your current loan. Review your loan agreement, contact your current lender, and explore alternative lenders to understand the options and potential costs involved in switching between fixed and variable home loans.

There can be several steps involved in switching home loans. Depending on your specific circumstances, this process can be simpler or, in some cases, more involved. Below are the basic steps to follow when switching: 

1. Review your current loan: Start by assessing your existing home loan. Understand the terms, interest rate, fees, and features of your current loan. This will help you compare it with potential new loan options.
2. Research and compare: Research different lenders and loan products available in the market. Consider factors such as interest rates, loan features, fees, and customer service. You can use RateCity’s refinancing search comparison or consult with mortgage brokers to gather information and compare offers from multiple lenders.
3. Calculate potential savings: Use RateCity’s online refinancing calculator or consult with a financial advisor to estimate the potential savings you could achieve by switching to a new loan. Compare the overall costs, including application fees, legal fees, and any potential exit fees from your current loan, against the savings you expect to make.
4. Get pre-approval: Once you've identified a suitable loan option, apply for pre-approval with the new lender. Provide the necessary documents, including proof of income, assets, and liabilities. The lender will assess your application and determine if you meet their lending criteria.
5. Make a formal application: If your pre-approval is granted, submit a formal application for the new loan. Provide all the required documentation, such as identification, employment details, and financial statements. The lender will review your application, conduct a valuation of the property, and assess your financial suitability.
6. Obtain loan approval: Once your application is approved, you'll receive a formal loan offer from the new lender. Carefully review the terms and conditions, including the interest rate, loan term, and any fees involved. Seek clarification from the lender if you have any questions or concerns.
7. Engage legal and settlement services: Engage a solicitor or conveyancer to handle the legal aspects of the loan switch. They will ensure the smooth transfer of the mortgage and title from your current lender to the new lender.
8. Loan settlement: Coordinate with your solicitor or conveyancer, as well as both the current and new lenders, to arrange the settlement of the loan. This typically involves the discharge of your existing loan and the establishment of the new loan. Your solicitor or conveyancer will guide you through the process and ensure all necessary documentation is completed.
9. Inform the relevant parties: Notify your existing lender of your intention to switch and provide them with the necessary instructions for loan discharge. Update any direct debit arrangements or automatic payments linked to your old loan. Inform other relevant parties, such as insurance providers and your employer if necessary, about the change in loan details.
10. Commence repayments: Once the loan settlement is complete, you'll begin making repayments to the new lender as per the terms of the new loan agreement. Set up any necessary payment arrangements and ensure you understand the repayment schedule and frequency.

The cost of switching home loans in Australia can vary depending on several factors, including the specific lenders involved, the loan amount, and the terms of your existing loan. Here are some potential costs to consider::

Application fees

When applying for a new home loan, lenders may charge an application fee. This fee covers the administrative costs associated with processing your application. Application fees can range from a few hundred dollars to over a thousand dollars, so it's important to check with the new lender about their fee structure.

Valuation Fees

As part of the loan application process, lenders typically require a valuation of the property. The cost of property valuation varies but can range from a few hundred dollars to around a thousand dollars. The valuation fee may be payable upfront or added to the loan amount.

Legal Fees

Engaging a solicitor or conveyancer is crucial for handling the legal aspects of the loan switch. They ensure the proper transfer of the mortgage and title from the old lender to the new lender. Legal fees can vary depending on the complexity of the transaction and the professional you engage. It's advisable to obtain quotes from different legal service providers to compare costs.

Discharge Fees

Your current lender may charge a discharge fee when you close your existing loan. Discharge fees can vary, typically ranging from a few hundred dollars to a few thousand dollars. Check your loan contract or contact your current lender to determine the exact discharge fee amount.

Break Costs

If you're currently on a fixed-rate home loan and switch before the fixed-rate term expires, you may be subject to break costs. These costs compensate the lender for the loss incurred due to the early termination of the fixed-rate loan. Break costs can be substantial, depending on market conditions and interest rate differentials. It's essential to review your loan contract or consult with your current lender to understand any potential break costs.

It's worth noting that some lenders may offer incentives, such as fee waivers or cashback offers, to attract borrowers looking to switch home loans. These incentives can help offset some of the costs associated with the switch. When considering switching, it's important to factor in both the costs and potential savings or benefits offered by the new loan.

To get an accurate estimate of the costs involved in switching home loans, it's advisable to contact potential new lenders and discuss their specific fees and charges. Additionally, consulting with a mortgage broker or seeking professional advice from a financial advisor can provide you with a more detailed analysis of the costs and potential savings associated with switching home loans in your specific situation.