How Much Can You Save?

The actual savings depend on multiple factors:

• Current interest rates versus your existing rate
• The remaining term of your loan
• The amount of equity in your property
• Your refinancing costs

Example Scenario

Suppose you have a $500,000 mortgage with an interest rate of 4.5% fixed for five years. You find a new lender offering 3.5% for a similar loan. If you refinance, you could save:

• Approximately $150 per month in interest alone
• Over a year, that totals $1,800
• Over the remaining 25 years of your loan, potential interest savings may reach $50,000+

Note: These figures are estimates; actual savings depend on your specific circumstances.

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Calculating Your Potential Savings

To determine if refinancing makes sense, follow these steps:

1. List current loan details:

   • Loan amount
   • Remaining term
   • Interest rate

2. Research current market rates:

   • Check with banks and mortgage brokers
   • Consider fixed vs. variable options

3. Estimate refinancing costs:

   • Break costs (if fixed rate)
   • Application and valuation fees
   • Discharge and setup fees

4. Use online calculators:

   • Many lenders provide mortgage calculators
   • Input your details to see potential monthly payments and savings

Break-Even Point

Calculate how long it takes to recoup refinancing costs:

Break-even period = Total refinancing costs ÷ Monthly interest savings

If you'll stay in your home longer than this period, refinancing could be worthwhile.

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Important Eligibility and Documentation

Refinancing also involves meeting certain criteria:

• Income verification: Payslips, tax returns, or bank statements
• Property valuation: To determine equity
• Debt Service Coverage Ratio (DSCR): Lenders assess your ability to repay
• Deposit sources: Savings, gifts, or overseas assets
• Visa status: Permanent residents and citizens are usually eligible; some temporary visa holders with established income may qualify

Documentation typically includes:

• Proof of identity (passport, driver’s license)
• Evidence of income
• Details of existing loans
• Bank statements

Tip: Some lenders may require a clear source of any overseas savings or investments used for deposit or to pay closing costs.

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Special Considerations for International Buyers

Navigating refinancing as an international buyer involves extra steps:

• Foreign income: Lenders may need evidence of consistent income in Australia or abroad
• Overseas assets: Information on conversions and how they support eligibility
• FIRB approval: Necessary if you're a foreign investor or non-resident

Be aware that certain restrictions apply:

• FIRB (Foreign Investment Review Board) limits foreign ownership and refinancing of existing property
• Lenders may require additional documentation to verify your foreign investments and income sources

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Risks and Things to Watch

While refinancing offers savings, consider potential pitfalls:

• Break costs: Paying penalties if you refinance during a fixed-rate period
• Extended loan term: Resetting the countdown may increase overall interest
• Hidden fees: Application, valuation, discharge fees
• Credit impact: Hard inquiries can temporarily affect your credit score

Always weigh these against the savings to ensure refinancing is beneficial long-term.

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When Is the Best Time to Refinance?

Ideal timing includes:

• When current interest rates are notably lower than your existing rate
• Before your fixed-rate period expires
• When property values increase, boosting equity
• If your financial situation improves, making loan approval easier

Remember: The mortgage market varies. Regularly checking the rates and comparing options can help you identify the best refinancing window.

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Final Thoughts

Refinancing can lead to substantial savings—sometimes tens of thousands of dollars over the life of your loan. But it requires careful calculation, understanding the costs involved, and aligning with your long-term goals.

As a trusted financial advisor, I recommend:

• Review your current loan terms
• Shop around for competitive rates
• Calculate your break-even point
• Consider how refinancing fits into your broader financial plan

Taking these steps ensures you make an informed decision and maximize your mortgage savings.

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References and Resources

• ASIC's rules on mortgage lending (https://asic.gov.au)
• Reserve Bank of Australia housing data (https://www.rba.gov.au)
• FIRB guidelines for overseas investors (https://firb.gov.au)
• Mortgage calculators and refinancing tools available online

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Your financial journey is unique—approach refinancing with confidence, and unlock the potential savings waiting for you.