Comparing And Contrasting Repricing And Refinancing

Chances are you’ve heard about refinancing, but are you familiar with the process of repricing your home loan? While both refinancing and repricing can help you save on your interest rate and mortgage repayments, there are also key differences that set these two approaches apart. 

Read on to learn more about how repricing and refinancing stack up against each other.

What is repricing?

Repricing is the process of requesting a new interest rate on your existing home loan with your current lender. This can help you to save on your mortgage repayments and save on interest payments over the life of your loan. When you reprice your home loan, the loan itself stays the same, it’s just the interest rate that changes.

You might choose to reprice your home loan because your fixed-rate mortgage is about to end or to secure a lower interest rate.

Benefits of repricing

Repricing a home loan can offer several benefits, depending on the specific circumstances and the terms of the repricing. Here are some potential advantages:

• Lower interest rates: One of the main reasons you might choose to reprice your home loan is to take advantage of a lower interest rate. This is often the case if market conditions have changed since you first opened your mortgage, repricing can allow you to secure a lower interest rate. Please note that other factors will impact your ability to reprice, such as your equity and LVR. 

• Lower mortgage repayments: When you switch to a lower interest rate, you’re able to save on interest payments and enjoy lower mortgage repayments in general.

• Cost-effective and convenient: The process of repricing doesn’t come with the same costs that come with refinancing. And because you’re just swapping to a lower interest rate with your existing lender, it’s often a much quicker internal process.

Drawbacks of repricing

While repricing a home loan can offer benefits, there are also potential disadvantages and considerations to keep in mind. Here are some drawbacks associated with repricing:

• Limited options: When it comes to repricing your home loan, you’re limited to the term of your current home loan. The only thing that changes is the interest rate.‍
• Repricing isn’t guaranteed: Just because you’re applying to reprice with your existing lender doesn’t mean it’s a sure bet. For example, if you’ve fallen behind with your repayments, you might not be eligible for repricing.

What is refinancing?

Refinancing is the process of taking out a new home loan to replace your existing mortgage. You can refinance with your existing lender or with a new lender entirely.

There are several key reasons to refinance, including moving to a lower interest rate, unlocking their home equity and accessing new features and facilities to name a few.

Benefits of refinancing

While refinancing also allows you to take advantage of lower interest rates, it offers several other benefits that don’t come with repricing your home loan:

• Overhaul your home loan: Refinancing your home loan allows you to completely overhaul your mortgage if you like. You’re essentially switching from one mortgage to a completely different home loan, so you have the flexibility to find a loan that better suits your financial needs. 

• Access home equity: When refinancing, you have the option to tap into the equity that you’ve built up against your home. You can use the extra funds to renovate your home or even purchase an investment property.

• New features and facilities: When you refinance, you’re able to choose a new loan that offers different features and facilities. From offset accounts to redraw facilities, certain loan features can help you achieve your financial goals quicker than you originally thought.

Drawbacks of refinancing

Refinancing also comes with its own set of drawbacks that are worth considering before making a decision:

• Refinancing costs: Refinancing your home loan often comes with its own set of fees. From discharge or break fees with your existing lender to all the costs associated with setting up a new loan with a new lender, it’s important to do the math to make sure refinancing is worth it.

• It’s more time-consuming: When you refinance, you’re typically switching to a new lender. The process of setting up a new loan account is a lot more time-consuming than simply repricing with your existing lender.

• Potential for Lenders Mortgage Insurance (LMI): If you haven’t built up 20% equity in your property, you could be up for LMI when you refinance to another lender. This can be a significant expense, so you’ll need to decide whether the cost of LMI is worth refinancing.

Deciding between repricing vs refinancing

When it comes to choosing between repricing or refinancing, it’s important to consider your specific financial goals, the current terms of your mortgage and the market conditions. If you’re happy with your current lender and your existing home loan, but you’d like to reduce your interest rate, repricing your home loan could be the way to go. 

On the other hand, if you’re keen to make some big changes to your mortgage or free up some funds for large expenses, like renovations, you might need to refinance your home loan.

At Unloan, we’re here to make refinancing easier. With low rates and a discount that just keeps getting better, there’s plenty to love about an Unloan home loan. Plus, all you have to do is follow six simple steps and you can be switching to Unloan before you know it. Check out your eligibility today. 

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000. 

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.