If you’re a property owner in Australia, it’s very likely that you are concerned about the interest rate and wondering if you are paying more than you need to in interest. If that’s the case, you’ll naturally want to find out how you can optimise or even reduce your loan costs. One of the best ways to do that is through refinancing.

In this guide, we will explain the critical aspects of refinancing in 2024, including refinance rates comparison, the benefits of refinancing at residential commercial rates, and strategic approaches to using equity and extending loan terms.

Whether you’re a business owner looking to lower the cost of your commercial lending facilities or a homeowner aiming to extend your loan to reduce repayments, understanding how to choose the refinance rate is the key to achieving significant financial savings from your property investments. 

Refinance Rate Comparison: How to Find the One? 

If you’ve already taken out a loan for your new home, you may feel locked into it until you finish repaying it. But did you know that’s not true? In fact, you can renegotiate the loan you took out some time ago to find better, more suitable terms of repayment. 

This process is called refinancing. Refinance rates are the interest rates applied when replacing an existing loan with a new one. 

This means that the loan you took out a few years ago, when the interest rate was competitive, may no longer be competitive anymore. There are many reasons for this, including but not limited to your fixed rate home loan having expired, the loan to value ratio (LVR) now being lower as you paid the loan down and the value of your property having increased, or simply that a different lender is offering a lower rate than your current lender at this time. By refinancing at a lower rate, you can reduce your monthly payments and save money over the life of the loan.

For example, if you have a $500,000 loan with 25 years remaining at an interest rate of 6.64% but refinance now at a rate of 6.14%, your monthly payments could decrease by $171, resulting in savings of $51k over the life of the loan*

*based on the interest rate remaining stable and not making any extra repayments. 

How to Conduct Effective Refinance Rates Comparison

If you decide to refinance your existing loan, you’ll need to start comparing the different refinance rates offered by various lenders to make sure you choose the most competitive one. 

So, how can you compare them? There are different ways to conduct a thorough refinance rate comparison between lenders, such as: 

  1. Browse comparison sites: There are plenty of sites that create detailed and updated comparison lists of refinance rates from different lenders. 
  2. Use online calculators: These tools allow you to input your current loan details and desired loan terms to compare rates from various lenders side-by-side. 
  3. Use our Extra Loan Repayments Calculator: It will help you estimate your monthly repayments based on different interest rates, loan amounts, and loan terms.
  4. Evaluate all the key metrics: When choosing your refinance rate, evaluate things like interest rates, fees, loan terms, and loan features. 
  5. Seek a financial advisor: You don’t have to do it alone! In fact, that’s not advisable. A professional refinancing expert will be able to help you navigate this complex process with ease and security. 

Refinancing Strategies to Lower Your Loan Costs 

Navigating the world of refinancing can be overwhelming, but with the right strategies, you can significantly reduce your loan costs and improve your financial health. Here are some effective refinancing strategies to lower your loan costs. 

Lowering the Cost of Your Commercial Lending Facilities 

As a business, you may feel the squeeze caused by high rates on your commercial loans. These rates can strain your cash flow and make it challenging to meet other financial obligations, reinvest into your business, or even make ends meet – especially if you’re a small or medium-sized enterprise. 

Refinancing can be a great way to ease this burden. By refinancing your commercial lending facilities, you have the opportunity to renegotiate terms with lenders and secure lower interest rates. This means more money in your pocket each month instead of going towards hefty loan repayments.

Refinancing Commercial Loans with Residential Property Equity

If you own a residential property, you can use its equity to get better terms on your commercial loans. This strategy involves leveraging the value of your home to secure more favourable loan conditions for your business by using the equity you own as collateral. 

Lenders may feel more secure lending you the money to buy commercial properties against residential equity than they would with purely commercial collateral. This means you can secure a lower interest rate as residential properties are considered less risky than commercial ones. 

Simply put, this strategy means that you’re leveraging the value of your home to support your business’s financial needs, and it can be a great way to buy commercial property in Australia with reduced risk.

Extending Your Loan Term to Reduce Monthly Repayments

Refinancing isn’t the only way to reduce the cost of your monthly repayments. Alternatively, you can simply opt to extend your home loan term. For instance, if you took out a loan for 25 years, you may want to extend this loan over 30 years to greatly reduce your repayments. 

Doing so will result in smaller monthly payments compared to shorter loan terms, which can provide immediate relief, especially if you’re in a tight financial situation or are experiencing a temporary loss of income. 

But extending your loan may also mean paying more in total interest over the life of the loan, so you should consider it carefully. 

Get Expert Refinancing Advice at Loanscope 

While refinancing your existing loan can be a smart financial move, it’s a complex process. You must conduct thorough research to find the refinance rates for you, evaluate fees and terms, and navigate the application and approval process. No wonder doing it all alone can feel overwhelming, if not downright impossible!

That’s why we’re here. At Loanscope, our experienced professionals guide you through every step of the refinancing journey, from assessing your financial needs and goals to finding the most competitive rates and submitting your application.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard