How to lower your home loan repayments in 2022

Looking to save money in 2022? Maybe it is time for you to refinance your mortgage. Refinancing your loan can be a great way to save money and make your budget breathe a bit easier.

According to the external refinancing figures released by the Australian Bureau of Statistics (ABS) as of October 2021 more than 498,000 Aussies refinance their loans. There was a total of $16.08 billion worth of home loans being refinanced from lender to another.

How much money can I save by refinancing a mortgage?

When you refinance you may be able to give yourself an instant pay raise! Well not really, but the extra cash in your pockets will make it feel like you did. That’s because - if you are able to switch to a lower home loan rate - your monthly repayments will be lower, which means you’ll be saving more money.

To get a feel for it, let’s look at the monthly repayment differences on a selection of rates and loan sizes. As shown below, the lower the interest rate, the less you’ll pay. For example, if your current loan size is $750,000 with a 3.75% p.a. interest rate and you manage to refinance to a new rate of 2.75% p.a. you’ll be able to save $326 a month and $3,912 a year.

These numbers are based on an owner occupier making principal and interest repayments over a 20 year period. You can crunch your own numbers using our mortgage repayment calculator.

What do I need to look for in a new home loan?

When looking at a new home loan there are few things you may want to consider before picking one that is right for you.

What type of interest rate do you want?

• Fixed interest rate: If you want your interest rate to stay the same for a period of time you can opt for a fixed rate loan. If you lock in a low fixed rate, you’ll know exactly how much your repayments will be for a couple of years.
  
• Variable interest rate: This option is great for refinancers looking for flexible loan features and competitive rates. For example, an 100% offset account facility is usually only available with a variable rate loan. However, keep in mind that with a variable loan your rate can change at any time.
  
• Split rate loan: If you want your loan refinance to be a mix between both rate options then you’ll want a split rate loan. That means a portion of your loan will be fixed giving you some rate security, and a portion will be variable allowing you to take advantage of features like having an offset account.

Are there extra loan features that are beneficial to you?

As mentioned above, there are a variety of home loan features - like an offset account - which could help you decide which loan is best for you.

Some features you may want to consider are:

• Extra repayments: Making extra repayments will help you pay your loan off faster and lower the total amount of interest you’ll pay. There are many lenders that offer the chance to make free extra repayments.
  
• Offset account: Another way to bring down the total interest you pay is by getting a home loan with an offset account. A mortgage offset is designed to act as an alternative to your everyday transaction account or savings account as a place to park your cash, but instead of earning an interest rate, an offset account will help you reduce the amount of interest you pay on your loan.
  
• Redraw facility: If you choose to make extra repayments on your home loan, you can get them back if your loan has a redraw facility. It’s generally only available with variable rate loans though.

How much will you pay in fees?

There are a couple of fees to budget for when looking to refinance your loan. Much like when you first applied, you’ll need to go through a similar application process when refinancing. 

Fess you’ll have to keep in mind might include an application fee from your new lender. Also when you leave your old lender you could be charged a discharge fee that might range from $0-$600. If you are moving from a fixed rate loan you might also be charged a break cost fee on top of the discharge fee which can be considerable, so it’s worth weighing up the cost benefit before making the switch.

What are some of the best home loans for refinancing?

If you want the best of the best, check out our Mozo Expert Choice Award winners for Home Loans. More than 500 loans were analysed and compared by a panel of judges to showcase loans which offer great value to Australian borrowers.

Ready to find out how much you can save by refinancing your mortgage? Check out the refinance home loan comparison table below to get started on your refinance journey. Or if you’re looking for even more information on refinancing your home loan then check out our range of refinancing guides.