What’s the difference between a home loan interest rate and a refinanced interest rate?
Learn how home loan interest rates differ from refinance rates, and what it means for your repayments, savings, and loan goals.
When it comes to choosing the best home loan, one of the key factors to consider is the interest rate. Your home loan interest rate can mean the difference between big savings or forking out a whole lot of extra cash over the life of your loan. Two terms that you might have come across when doing your research are initial home loan interest rates and refinanced interest rates, but you might not be familiar with what they actually refer to.
What is an initial home loan interest rate?
An initial home loan interest rate, also known as the original rate or purchase rate, is the interest rate you agree to when you first take out a mortgage to buy a home. The initial interest rate is based on a number of factors, including the:
- Cash rate set by the Reserve Bank of Australia (RBA)
- Term of the loan
- Loan-to-value ratio (LVR) and
- Your credit score among other things.
Fixed rate home loans
If you take out a fixed-rate home loan, the initial interest rate will be locked in for an agreed-upon term. This could be anywhere from one to five years.
Variable rate home loans
If you apply for a variable home loan, the interest rate can change at any time. This means that your repayments are more likely to fluctuate based on factors such as changes to the official cash rate and funding costs. Learn more about how interest rates are determined.
What are refinancing interest rates?
A refinanced interest rate is the interest rate you secure when you refinance your home loan. In short, refinancing is the process of replacing your current mortgage with a new one, often with more favourable terms, lower interest rates or different loan terms.
When it comes time to refinance, your new interest rate is based on a number of factors. Your refinancing rate can be lower or higher than your initial home loan interest rate, depending on these factors including:
- Your current financial situation
- Your credit score
- Market conditions
When should you consider refinancing?
The best time to refinance really depends on your individual situation – these include:
- You’re on the hunt for a more competitive interest rate,
- You’re looking to access the equity in your home,
- You want to reduce the loan term or
- You’re fixed rate is coming to an end
- You want to consolidate your debt
- You want to access better features with a different lender or home loan
In the right circumstances, refinancing your home loan can help you save over the life of your home loan. Learn more about refinancing here and if it’s right for you here.
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, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty 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.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
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, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty 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.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. 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.
