If you’re interested in refinancing your mortgage you need to consider if this is the right option for you. You must think about why it is you want to refinance, and what the costs will be to move your mortgage.

You may also like to ask yourself if your current home loan matches your needs – for example, do you use all of your loan features, or are you missing some loan features that you could really make use of?

When refinancing, consider the savings now and in the future, also find out the costs associated and do the sums. It’s important to consider the long term benefits against the actual costs of mortgage refinancing.


The Cheapest Interest Rate

The loan with the cheapest interest rate is not always the right option. In some cases, a loan with the lowest rate may actually cost you more money over the loan term. A competitive home loan will offer a combination of competitive rates, low fees and loan flexibility.

Many borrowers are refinancing their home loan for a number of reasons, including:

  • Consolidate debt
  • Borrow money to renovate or invest
  • A more competitive home loan interest rate
  • Move from a fixed home loan rate to a variable home loan rate, or vice versa

Refinancing your mortgage or loan is not an easy decision. At The Mortgage Approval Company your dedicated mortgage broker will help you do the sums, taking into account all the costs of mortgage refinancing, to help you determine whether or not refinancing is the right move for you.

Interest rate options

Interest rates are a major consideration for borrowers when making a decision to refinance, so it’s important to understand how they work.

Most borrowers are aware there are two types of interest rates – variable and fixed. Each type is based on different financial market indicators: variable rates are driven predominantly by Reserve Bank’s Official Cash Rate policy while fixed rates are driven by the predicted trends in the wholesale money market.

Thrown into the mix is the Comparison Rate, or Annualised Average Percentage Rate (AAPR), a figure designed to show the borrower the ‘true’ cost of the loan.

Variable interest rates

Interest rates are a major consideration for borrowers when making a decision to refinance, so it’s important to understand how they work.

The Reserve Bank uses interest rates to manage consumer spending and thereby inflation. The decision when and if to move the Official Cash Rate is based on a range of economic indicators, including the Consumer Price Index (CPI), wages data, employment figures, the Producer Price Index (PPI) and the performance of global financial markets. The variable interest rates of lenders generally move up and down in line with Official Cash Rate fluctuations. You will need to take this into account when considering which type of home loan to take out.

And to make things slightly more complicated, in recent times lenders have changed their variable rates outside official Reserve Bank movements, and will do so when the cost to them of providing funding increases.

At The Mortgage Approval Company your mortgage broker will help you navigate through the discounts and specials on fixed and variable interest rate loans to ensure your home loan is competitive and suits your lifestyle.

Fixed interest rates

Fixed rates are influenced by the wholesale money market. Fixed rates can be taken out for terms of 1 to 10 years. By fixing a rate you get repayment certainty over a designated term. You are better off if variable rates increase but can be penalised if rates drop or you need to break the fixed rate early.

At The Mortgage Approval Company your mortgage broker will help you navigate through the discounts and specials on fixed and variable interest rate loans to ensure your home loan is competitive and suits your lifestyle.

Comparison rates

The comparison rate, or Annualised Average Percentage Rate (AAPR), of a loan can be a useful indicator of the overall costs you will have to pay over your loan term. It takes into account upfront fees, honeymoon rates, ongoing fees, different compounding periods and other factors to produce an average yearly interest rate that reflects the overall cost of your loan.

It’s important to note that while useful, even a comparison rate will not show all the costs associated with your loan. At The Mortgage Approval Company your mortgage broker will discuss other items that may not be included or cannot be accurately reflected in the comparison rate calculation which include; occasional and one-off charges such as redraw fees, exit fees and penalties; loan features such as portability; and non-standard loan terms and loan amounts.


Access Your Equity

Many homeowners find it difficult and frustrating saving for things like holidays or renovations whilst paying off a mortgage – but it doesn’t have to be that way. Home equity loans are designed to give you access to the equity in your existing home loan via a line of credit loan.

Mortgage refinancing is a common way of accessing the equity you have built up in your existing property. The equity in your home is the distinction between the property value and what you owe on your mortgage.

The amount you can borrow is subject to the amount of equity you have built up in your property and other criteria; as a guideline you are limited to borrowing a maximum of 90% of the value of the property.

You can use the funds from your line of credit loan to buy an investment property, renovate your existing home or to take a holiday.

How do home equity loans work?

Home Equity loans are most commonly offered as a line of credit loan facility, which allows you to withdraw funds up to a set limit at any time. You may be able to draw down the initial equity loan either as a lump sum or in stages. Generally a line of credit loan is an interest-only loan, and in some cases you may be able to capitalise the interest payments.

Interest rates are generally slightly higher on a line of credit than standard variable home loans – however, some lenders offer better rates on these loans to encourage refinancing.



Renovating is a great way of adding value to your home. But like most creative projects renovating can be frustrating and stressful – that’s where The Mortgage Approval Company can help in getting the right finance the first time.

Depending on the size of your renovation project, you could need anything from a few thousand to hundreds of thousands of dollars. If you already have an existing home loan then a The Mortgage Approval Company Mortgage broker will help you explore a number of competitive refinance options for your existing home loan.

Renovations don’t always go smoothly, but we’ll make sure your finance loan does.

Before you get started on your project, you will need to consider the features on your home loan. To give you greater control over your renovation you can choose from a range of financing options.

Redraw Facility – For smaller projects such as a new bathroom or sun deck

A redraw facility allows you to access additional funds paid into your home loan if you need extra money. You may be able to redraw up to the amount of the additional repayments made. A redraw facility offers flexible access to funds when they are most needed.

Top-up loan – For small to medium sized renovations

A top-up loan allows you to increase the credit on your existing home loan to fund your renovation. It essentially taps into equity you have already built up in your property and extends some of that amount back to you, avoiding the expenses associated with acquiring additional finance through other sources. Unlike an equity loan, you are generally not able to continue to draw your interest back up to an agreed level – if you find you require additional funds you will need to apply for another top-up loan. There may be a minimum amount you can top-up, usually around $10,000.

Home Equity loans – For medium sized projects such as a kitchen or pool

Equity loans allow you to access the equity in your property to fund your renovation project. The amount you can borrow is subject to the amount of equity you have built up in your property and other serviceability criteria, but as a guideline, even if you own your home outright you are likely to be limited to borrowing a maximum of 80% of the value of your property.


Debt Consolidation

Struggling to make repayments on high interest debts such as credit cards and personal loans? Debt consolidation can help reduce your monthly finance repayments, save you money on fees and charges and take control your debt by consolidating your existing loans into a new lower interest rate loan.

Debt consolidation can lower your monthly repayments by combining your current liabilities such as credit cards, personal loans and your home loan into a new and more competitive lower interest rate home loan.


Benefits of debt consolidation:

  • You may save on fees and charges.
  • Secure a competitive home loan.
  • Reduce your monthly repayments.
  • Control your finances and pay off your loans sooner.

The home owners in the example below saved thousands by consolidating their debt into one single loan, and so could you!


John and Susan both work full time with average incomes of $70,000 and $55,000 respectively. They have 2 children and purchased their home 3 years ago for $340,000, but it is now worth $450,000. Currently, John and Susan are paying off the following debts:

  • Home Loan $340,000@7.60% p.a. monthly repayments $2,401
  • Personal Loan $24,000@12.55% p.a. monthly repayments $539
  • Credit Cards $7,300 +$5,900 @19.2% monthly repayments $343


TOTAL DEBT $377,200



Result: John and Susan refinanced and consolidated their debt into a $377,200 basic variable home loan at 7.00% p.a. over 30 years. Their new total monthly repayments are now $2,509 saving them $7743 a month.

Getting debt consolidation advice is easy. We come to your home or to a location that suits you and ask you some important questions about your life style, your income, the type of loans you have and what your future plans are.

Things to consider before consolidating debt

The biggest single issue with debt consolidation is that your debt is now considered a ‘secured debt’, so if you don’t pay it back, you risk losing your ‘security’ – your home. Other points to consider:

  • Fees and charges associated with setting up your debt consolidation loan.
  • Control your credit cards, you have now freed up your credit card to accumulate more debt.

Often people refinance short-term debt into a home loan and end up paying more over a longer term. You can create more than one home loan account on a shorter term to replicate the original debt term to ensure you save money.


Managing Mortgage Stress

Mortgage stress can affect anyone, regardless of where you live or how much your property is worth. Although interest rates do play a part in creating mortgage stress, more often than not the real cause lies with an unexpected life event; unemployment, illness, injury and relationship breakdown are some of the most common causes of mortgage stress. This puts real pressure on homeowners to pay their loan repayments on time.

Preventing mortgage stress

The best solution for managing mortgage stress is to put in place strategies to avoid it altogether. Two key areas that can help you manage your mortgage and prevent mortgage stress are:

  • Sit down and create a good budget based on your current financial situation and goals. Consider what is necessary, what is desired and what is truly wasteful. Remember, you do need to allow some ‘fun’ or discretionary money’ in your budget.
  • Try to build a ‘buffer’ into your home loan by making additional repayments whenever possible. This will give you some leeway if you do find yourself in temporary difficulties. You can achieve this by simply making fortnightly payments at 50% of your normal monthly payment, making additional payments, or saving additional money into an offset account.

Insuring against mortgage stress

Consider taking out a Life Insurance, Income Protection Insurance or Mortgage Protection Insurance policy in conjunction with your home loan, to cover you in the event of illness, injury or even death.

What to do if you are experiencing mortgage stress

If you do find yourself experiencing mortgage stress, or believe you will soon have trouble making your home loan repayments, you should talk to The Mortgage Approval Company as soon as possible. Your mortgage broker can then present your case to your lender for consideration. It’s important to remember your lender will only sell your home as a last resort – financially it’s the lenders preference for you to keep your home.

Some options that you may have available to you to help manage your situations when you are experiencing mortgage stress include:

  • Apply for a hardship variation to extend your loan term, take a repayment holiday, or both. Most lenders offer these options. You can read more on this in our hardship variation section
  • Consolidate debt
  • Refinance your home loan
  • Switch to an interest only repayment option
  • Apply for assistance – some state governments assist borrowers to meet payments that have resulted from temporary shortfalls

It’s important to note that not all options will be available to you depending on your situation and home loan. In many cases it will depend not just on your circumstances but also the lender your home loan is with. There are also likely to be some fees involved, particularly if you are looking at refinancing.

You should discuss your situation with your mortgage broker and other related financial professionals, such as your financial planner and accountant, before making a decision on your course of action.

In more extreme cases, you may need to consider:

  • Accessing your superannuation to assist you in making your home loan repayments. This requires careful consideration to ensure you don’t lose both your house and your superannuation.
  • Selling your home and downsizing/moving further out of town, or returning to renting for a period of time while you get back on your feet. The sooner you make this decision, the better off you will be.


Mortgage Hardship Variation

If you are experiencing temporary difficulties in meeting your mortgage repayments, you may be eligible for a hardship variation from your lender. Some common reasons behind short-term mortgage repayment problems include job loss, injury and illness.

How do I apply for a hardship variation?

As soon as you are aware that you may experience some difficulty in making your mortgage repayments, you should contact your mortgage broker and arrange to send a letter requesting a hardship variation to your lender. This should include:

  • Your current loan details
  • Reason for hardship variation request e.g. temporary loss of job
  • Current income position
  • Proof of ability to meet repayments after the variation has run its term

Get assistance with a mortgage hardship variation application

Your mortgage broker can help ensure all the relevant information has been included.

In most cases, your lender will want to work with you to work out a repayment plan. However, if for some reason you do not get a positive reaction from your lender, you can apply for assistance via an External Dispute Resolution Service, such as the Banking Industry Ombudsman. Your mortgage broker will assist you with this process if it is required.

How do hardship variations work?

If your home loan is up to $500,000, you are legally entitled to be considered for a hardship variation. For loans of more than $500,000, it is up to the lender to determine if they will consider your request. Regardless of your home loan value, it is important to contact your lender to discuss the options available to you.

There are a number of different formats a hardship variation may take, depending on your personal financial circumstances. The Federal Government has recently negotiated with the major banks to make these provisions more standardized; however there are still variations between lenders on what is available. Hardship variations available may include:

  • Temporary reduction of mortgage repayment amount

    If you are able to continue to make repayments, but cannot afford the full required repayment amount, you can apply for a temporary reduction in repayment amount. When you are submitting your request for a hardship variation, you should ensure you state the amount you believe you can continue to repay. If you are already experiencing difficulties when you submit your request, it will help if you continue to make repayments at the proposed new level to show you are capable of meeting this repayment amount. It’s important to note that your overall loan term will be extended to accommodate the temporary reduction in repayment amount

  • Temporary suspension of mortgage repayments

    A second option is to suspend your mortgage repayments – or take a mortgage repayment holiday – for a set period of time. Most lenders have an allowance for anywhere up to 12 months break from your repayments, depending on your situation. After the hardship variation period ends, your repayments will revert to normal. All repayments and interest charges will be capitalised to your loan balance during the repayment holiday. This option will also extend your overall loan term.

  • Reduction and suspension of mortgage repayments

    In some cases, you may be able to secure a hardship variation that combines both a reduction in your repayments and a temporary suspension of your repayments.

  • Convert your repayments to Interest Only

    In some cases, you may be able to switch your home loan to an interest only repayment option, which will reduce your normal monthly repayments.


Non-Conforming Home Loans

Non-conforming home loans allow anyone who does not meet the credit criteria of mainstream lenders to secure home finance.

A non-conforming loan may suit you if you are:

  • Credit-impaired
  • Self-employed
  • Non-resident
  • New resident
  • Security-impaired
  • Have a low or no deposit
  • Casual or seasonal worker
  • Older borrower

Non-conforming home loans are a lot more flexible than in the past and may be available as a variable, fixed or split rate loan, and have many of the features of a more traditional loan available, such as offset. The interest rate and/or fees on non-conforming home loans are generally higher.

This may also be an option if you need to repair your credit rating, and some lenders will allow you to refinance into a more traditional style home loan after a period of time if you have a good repayment history.



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