How I saved $16k by refinancing my home loan twice in 2 years

Bank CEOs must hate me because I save so much money on my mortgage. Here's how I do it.

Refinancing can help you save thousands on your home loan. I should know – I’ve done it twice in the last 18 months.

When the pandemic first hit and interest rates halved, I immediately applied to refinance.

I stood to save a pretty penny, but full disclosure – I had to pay a hefty break fee to get there.

I’d locked in a 3-year fixed rate home loan at 3.99%, but it still had 2 years to go. So to get out of the loan contract, I had to pay a whopping $10k break fee.

Still, it was worth it.

After negotiations with my current lender fell over (they weren’t prepared to budge even slightly on the variable part of my loan), I found a new loan with a new lender.

The new bank, ANZ, was prepared to offer me a fixed rate of 2.19% – almost half my previous rate.

I wanted to keep some of the debt in a variable rate loan, with an offset account attached. So I split the loan to be part fixed and part variable, with a variable rate of 2.79%.

These were my next steps:

• I locked in a 2-year fixed rate and refinanced.
• I banked a $3,000 cashback.
• I calculated that my refinance would save me $9,000 in interest each year for 2 years – a total saving of $18,000.
• I paid a $10k break fee to get out of the old loan contract.

Yes, I paid $10k upfront to save $18k over time. But the maths added up. I was going to be $8,000 ahead, with a $3,000 cashback sweetener, and all in all, I stood to save $11,000 from that refinance.

But I wasn’t satisfied.

One of the perils of working as a finance journalist is that I’m privy to all the latest mortgage news, trends and rates.

Week after week, the press releases and rate updates have rolled in, with each deal revealing yet another better offer than the loan I’d locked in.

Many Australians are taking advantage of these deals. In fact, a recent Finder survey of 1,000 respondents found that 41% of us have recently refinanced, or plan to refinance their mortgage within the next 12 months.

My problem? I'd just refinanced last year. I was now 12 months into my 2-year fixed rate.

So I couldn't refinance again so quickly... could I?

That's when it hit me.

There’s nothing stopping me from refinancing again.

Nothing except a pesky break fee, that is, and a quick call to the bank confirmed that it would set me back around $300.

I looked up the best home loan rates to see what was on offer, and I discovered the potential to save money again.

I was able to lock in a new 3-year fixed rate at 1.85%, with the variable portion attached to a rate of 2.39%.

And best of all, I scored another $3,000 cash back.

How much money did I save all up by refinancing my loan twice?

I’m on track to save a further $2,400 on my interest payments in the year ahead, comparing the new lower interest rates to my older rates. This is on top of the $3,000 cashback.

So in total, I’ve saved the following:

• $18,000 mortgage interest from the first refinance
• $3,000 cashback from the first refinance
• $2,400 interest from the second refinance
• $3,000 cashback from the second refinance
• Minus a $10k break fee and a $300 break fee
  = $16,100 savings

This new refinance was settled just this week. And I haven’t even shared the best part!

Because interest rates are now so ridiculously low and because property values have soared in the last year, I was able to extract some equity.

In addition to the above interest savings, I’m also pulling out a fair chunk of money to fund some renovations.

And my repayments are set to increase by just $40 a week.

Our recent Finder study revealed that 59% of mortgage holders are not considering refinancing, and that could be such a missed opportunity to save a huge amount of money. Even if you refinanced in 2020 and even if you're on a fixed rate, it doesn't hurt to review your options and see if you could still save more.

There are plenty of cash back home loan offers to sweeten the deal further – there's nothing to lose by checking out what's available, but there's so much to potentially gain.