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What Are the Major Costs of Refinancing your Home Loan?

Amid Australia’s competitive home loan market, many Aussie homeowners have the power to refinance their mortgage to a lower interest rate. This can be a simple process, but there are usually upfront costs involved. So is it worth it?

One of the most common motivations among Aussie homeowners for refinancing – moving from one existing mortgage to another – is to access a lower interest rate. This isn’t surprising, given that a lower rate could save you thousands in interest repayments every year. However, refinancing does require some effort to be put in on your own behalf. The level of savings generated through refinancing depends (amongst other things) on the size of your mortgage, how many years left on the loan term and how much lower the new interest rate is compared to your current rate.

This needs to be considered alongside the initial costs of refinancing to help you determine whether it’s worth it. These upfront costs can vary depending on the lender and the type of refinancing.

Generally, there are two main types of home loan refinance:

  • External refinance: When you move your loan to another financial lender
  • Internal refinance: When you refinance your home loan with your existing lender

Refinancing with your existing lender, for instance, might save you some of the additional fees associated with changing lenders, such as exit, valuation and application fees.

Upfront costs of refinancing

There are a variety of fees that can add to the upfront costs of refinancing a home loan. The costs of these different fees and indeed whether they are even charged at all will depend on the lender. When assessing the cost of refinancing, it’s important to calculate the total cost of changing as opposed to comparing individual fees between different lenders. For example, some lenders may waive application fees, but charge higher ongoing fees instead.

Some of the typical upfront refinancing fees you might come across are explained below, along with high-level indicative costs.

Application fee

If you’re refinancing externally with another lender, you may be required to pay an application fee. Also known as an ‘establishment’ fee, this is a one-off payment to set up the refinanced home loan and cover the administration costs. Some lenders may include the costs of valuation in their application fee.

Cost range: Up to $1,000

Valuation fee

Depending on the level of equity you have in your property, a new lender may require a valuation to be done before deciding to let you refinance with them. The cost of the valuation fee often depends on the lender and the location of the property. For example, valuation fees tend to be higher for rural properties compared to those in more urban areas (usually due to simple practicalities including additional travel time required to get to the property).

Cost range: Up to $600

Discharge fee

Also known as a ‘termination’ fee, mortgage discharge fees are applicable to an external refinance, where your existing lender may require you to pay discharge fees to cover the administrative costs required to end the loan contract.

Cost range: Anywhere from $200 up to $1,000

Break fee

If you currently have a fixed rate home loan and you want to refinance before the end of the fixed term, you’ll have to pay break fees. These fees cover any potential losses your current lender might face due to the ‘economic cost’ of that agreement not running to its originally slated term.

Break costs can be somewhat complicated to calculate, but they generally depend on the loan amount, the fixed rate compared to the current variable market rate and the length of time remaining on the fixed term. Typically, break fees will be higher if interest rates have gone down since the start of the fixed term.

Cost range: Depends on the situation, but can be many thousands of dollars (always get a definitive answer from your lender).

Settlement fee

Settlement fees are paid to a new lender to settle the new loan. They are typically used to cover the costs of arranging for a legal representative of the lender to attend the loan settlement with you and your conveyancer or solicitor.

Cost range: Anywhere from $100 to $600

Mortgage registration fees

A mortgage registration fee is charged by the State Government for the mortgage to be added to a register to prevent you from selling the property without paying back the lender.

Cost range: $100-$180 (Varies by State and Territory)

Exit fees

Following government reforms, lenders have been banned from charging early exit fees on loans taken out after 1 July 2011. However, lenders may still charge exit fees on loans taken out before this date.

Cost range: $0-$7,000 (Check the terms of your existing loan)

Time and effort

Time is money, and it takes time to compare home loans and fully assess the terms and conditions between different products.

Cost range: Depends on how much you value your time!

Final word

The number and magnitude of refinancing costs outlined above might seem daunting, but it’s important that they’re considered within the context of the long-term savings that can be generated by refinancing your home loan to a lower interest rate. Depending on your circumstances, you may even be able to recoup these costs after just a small number of monthly repayments. To help you decide whether its worth it, use a home loan calculator to help you work out how much you’ll save in interest over the life of the loan by switching loans, then weigh this amount against the total upfront costs of making the switch.

Make sure that you are thorough in working out which ‘change’ costs apply to you from both your existing lender as well as your possible new lender, so that you can come up with a definitive amount of ‘cost’ with which to compare your likely savings from your improved interest rate from your new lender.

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Beginner’s Guide to Interest-Only Home Loans

In recent years, interest-only home loans accounted for around 40% of all outstanding Australian mortgages, before regulatory bodies introduced measures to slow down this form of lending.

There’s now a cloud looming on Australia’s economic horizon in the form of $360 billion worth of these loans that are set to ‘expire’ over the next three years, upon which they’ll transition into the standard principal and interest repayment format. There are some concerns that many of the borrowers of these loans will be unable to meet the significantly higher repayments that will kick in, possibly prompting a mass sell-off of property.

Given these concerns, it’s likely some borrowers don’t fully understand interest-only home loans and the risks they entail.

So if you’re considering an interest-only loan, read on to learn about what they are, the risks and benefits, what happens when they expire and how much more they can cost you over the life of your loan.  

What is an interest-only loan?

Interest-only (IO) loans are home loans which delay the repayment of the borrowed amount (the ‘principal’) for a fixed term, usually between three and five years. During this time, you only have to pay the interest on your loan, not the principal. At the end of that set period, the repayments transition to paying off the principal as well as the interest.

An interest-only loan term is usually the same length as a standard home loan – around 30 years. However, instead of paying principal and interest for the full 30 years, you have the option to pay just interest for the first five years, for example, and then pay substantially more for the remaining 25 years. Interest-only home loans could be summed up as ‘less now’ but ‘more later’ in terms of the monthly repayments one has to make across the term of the loan.

Benefits and risks of interest-only loans

The decision to take out an interest-only loan should only be made after carefully considering the risks and benefits involved. Some of these are outlined below.


  1. Lower repayments: The temporary lower repayments of an interest-only loan can free up money for other expenses like renovations or paying off other outstanding debts.
  2. Investment Strategy: Interest-only loans are great for investors who plan to profit by selling their properties within the IO period (eg. after making a capital gain) because it reduces their expenses (and relative cash outflows)
  3. Buying time: The reduced repayments effectively let people buy time through the delaying of higher repayments. Whether it be a temporary reduction of income (eg. someone taking 2 years off to study) or a temporary increase in expenses (eg. 2 years of higher school fees), if borrowers are confident of returning back to a level of income or expense ‘normality’ at the end of the interest-only term, then interest-only loans are a great way for them to effectively buy time and flexibility.


  1. Pay more in interest: Since you’re not paying off the principal over the interest-only period, you’ll end up paying more interest over the life of your loan than someone who has been paying both principal and interest over the entirety of theirs.
  2. Higher interest rates (generally): Interest-only loans often have a higher rate of interest than principle & interest (P&I) loans. This isn’t the case for all lenders though.
  3. Repayment shock upon expiry: If you’re not prepared, the expiry of an interest-only period can come as a shock as the cost of repayments suddenly increase. The RBA reports that repayments could increase by around 30-40% as the principal is repaid as well as interest. For a typical interest only-borrower with a $400,000 30-year mortgage with a 5-year interest-only period, the RBA estimates this would equate to an extra $7,000 per year in repayments.
  4. Less equity: By only paying the interest portion of your repayments, you’re possibly (subject to property value movements) not building any equity in your property. Many investors in recent times have built equity through rises in the value of their properties, but if the value falls, you could end up owing more to the lender than what the property could actually sell for if indeed you were forced to sell the property.

How long can I take out an interest-only loan for?

Interest-only periods usually last between three and five years. Some lenders offer interest-only periods of up to 10 to 15 years, but this may be restricted to investors. You may be able to negotiate the length of the interest-only period with your lender, depending on your personal circumstances.

What happens when my interest-only loan expires?

When your interest-only loan period expires, your loan will roll over to principal and interest repayments. This means you’ll be paying off the outstanding mortgage as well as interest.

There are three main options you can pursue if your interest-only loan period is ending:

  • Extend the interest-only period: Lenders will want to keep their customers and may be willing to extend your interest-only period. This will probably be subject to a credit assessment and property valuation.
  • Refinance to another loan: If you’re nearing the end of your interest-only period, it might be a good idea to review your interest rate and finances before comparing other options in the market. Other lenders might be able to offer a better rate on a principal and interest loan than the rate of what your interest-only loan is rolling over to.
  • Ride out the expiry: If you’ve planned well and you’re confident that you’ll afford the P&I repayments (and you’re happy with your interest rate), riding out the expiry of the interest-only period and transitioning to the P&I stage of your current home loan is the most hassle-free option at your disposal.

Interest Only vs Principal & Interest: Cost difference example

Desmond and Rachael have both found houses to buy and decided to take out separate loans of $400,000 for 30 years. Desmond chooses a P&I loan, while Rachael opts to pay interest-only for the first five years before switching to P&I for the remaining 25 years.

For the purposes of this comparison, it’s assumed both Desmond and Rachael have the same interest rate of 4.0% which holds steady over the 30 years.

Loan Monthly repayment during IO period Monthly repayment after IO period Total cost (principal & interest) of the loan
Desmond (P&I) $400,000 N/A $1,910 $687,478
Rachael (IO) $400,000 $1,333 $2,111 $713,404
Total cost difference $25,926

Source: Home Loan Repayments Calculator

As shown in the table above, by only paying interest for the first five years of the mortgage, Rachael’s loan will cost her $25,926 more than Desmond’s over the 30 years.

Final word

Interest-only loans can be a great short-term solution for property investors and owner occupiers alike, however it’s important to remember that you will have to make principal repayments at some point down the track. Interest-only loans tend to have more benefits for property investors, while owner-occupiers (outside of what might be described as extraordinary circumstances) are generally better suited towards a standard principal and interest loan. Do your research and read the terms and conditions before making a purchase decision.

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4 Major Factors Influencing Your Car Loan Interest Rate

If you’re looking at car loans, it pays to be prepared. We look at some of the factors that can influence the interest rate you can get on a car loan.

What is a car loan interest rate?

When applying for a car loan (or any type of loan for that matter), it’s important to look at interest rates. An interest rate is essentially a fee you’re charged for borrowing money from a lender. It is expressed as a percentage of the total loan amount per annum (or year).

There are a number factors that can influence the potential car loan interest rate you can get – such as your personal finances, credit history, deposits and not to mention the amount of shopping around that you do. Let’s have a closer look at some of these factors.

Financial Status

The first thing a lender will want to see when determining your car loan interest rate is evidence of your financial status. Factors like your current income, other loans or credit you might be paying off and your spending habits have a big influence on your potential interest rate. A way to help reduce this process is to sit down and calculate how much you can realistically afford each month. A car loan calculator, like the one from our sister site can be a great tool to help you figure out how much repayments will cost you.

Vehicle age

Vehicle age is another thing that lenders will take into consideration, with some lenders refusing to loan if the car is older than five years. This is because cars are one of the common purchases that lose value (depreciate) over time. If you default on a payment and the lender has to seize your car and sell it, they may not get the full amount they’re owed back from the sale. This is not good business for a lender!

There are some lenders that will still provide a loan for a car over five years old, but they will usually charge a higher interest rate to factor in the additional risk they are taking on with that particular loan.

Credit history

Your credit score indicates to a lender how much of a ‘risk’ you are as a borrower. Many people think that by applying to multiple lenders at the same time, they can get the best interest rate possible. However, each time you apply for credit, your score can be negatively impacted – so making multiple applications could backfire and end up impacting your credit score which will impact your interest rate. Make sure you’re aware of your credit rating before applying for a loan because if your application is rejected by the lender, this could also impact your credit history.

Your research

Did you know that the difference between the highest and lowest car loan interest rates on the market at the time of writing is more than 9% p.a.? While there are some factors outside of your control that can determine your car loan’s interest rate, you can always shop around to give yourself a better chance of securing a good rate. By doing some research, you could be saving yourself thousands in interest payments over the life of the loan. That’s money that could be put towards your home loan, savings, renovations or even a holiday. Ultimately, interest rates are calculated on personal circumstances but there’s no harm in being prepared.

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How To Choose Between a Fixed or Variable Home Loan

Choosing between a fixed or variable rate home loan is a common dilemma for many borrowers. We look at what they are and outline some of the key advantages and disadvantages of both to help you decide which option is suitable for you.

What is a fixed rate home loan?

A fixed interest rate home loan is a home loan with the option to lock in (or ‘fix’) your interest rate for a set period of time (usually between one and five years). One of the main advantages of this is cash-flow certainty. By knowing exactly what your repayments will be, you’ll be able to plan ahead and budget for the future. This factor often makes fixed rate home loans very popular for investors over the first 2-3 years that they own a property for.

Another reason why a fixed rate may be a good option for you is that any interest rate rises won’t affect the amount of interest you will have to pay. However, if interest rates drop, you might be paying more in interest than someone who has a variable rate home loan.

It’s also important to note that often additional loan repayments are not allowed with fixed-rate loans (or only allowed if you pay a fee). Because of this, the ability to redraw is also frequently not offered on a fixed rate loan, effectively reducing the flexibility of the loan.

What is a variable rate home loan?

A variable rate home loan is a home loan where your interest rate will move (or ‘vary’) with changes to the market. This means your interest rate can rise or fall over the term of your loan.

Variable home loans also have appealing features like the ability to make extra repayments (often at no extra cost) to help you pay off your loan sooner and save you interest. Another advantage can include unlimited redraws (where you ‘draw’ back out the extra repayments you made).

Variable rate loans are more uncertain than fixed interest rate loans. This can make budgeting for your interest payments more difficult because you have to take into account potential rate rises. If you aren’t prepared, you could have trouble keeping up with repayments.

Can I split my loan?

A popular home loan option is to split your loan between fixed and variable. This allows you to lock in a fixed interest rate for up to 5 years on a portion of your loan, while the remainder is on a variable rate. Effectively, this can help you ‘hedge your bets’ on an interest rate rise or cut, minimising the risks associated with interest rate movements. At the end of the fixed rate period, you have the choice of fixing that portion again (at the current market rate for fixed interest) or simply letting it revert back to the same variable interest rate that you are paying on the balance of your loan.

Interest rate risk

Trying to predict home loan interest rates can be a risky business, but in effect, every homeowner is doing this whether they decide on a variable interest rate or fixed. If you’re new to the market or worried about interest rates going up sooner rather than later, then fixing all or a portion of your loan could be a good strategy. A quick look at what’s on offer in the market for 3-year fixed rates at the time of writing shows that the premium you’d pay to fix your rate could be around 25 to 50 basis points (0.25 to 0.50 percentage points). Our last RBA rate change was back in August 2016, so banks charging a higher price on a fixed rate could be them anticipating that the current variable rate is going to go up by this in the next 3 years and could possibly continue into the medium to long-term.

Home loans depend on your individual circumstances, attitudes and motivations.  If you’re new to the market and don’t feel comfortable taking any risks then you may want to consider choosing a fixed rate home loan, much like many new property investors do for the first several years of their investment property loan. If you’re more confident with interest rates and are happy to be paying what the great majority of other lenders are paying (relatively speaking), you may find a variable rate home loan is more suited to your needs.

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What is a Car Loan Balloon Payment and How Does it Work?

Learn exactly what a car loan balloon payment is, why you might consider it and how it could affect the cost of your car loan.  

What is a balloon payment on a car loan?

A balloon payment or “residual value” is an agreed-upon lump sum that you will pay to your lender at the end of the car loan term. Effectively, the balloon amount builds over the period of the loan by diverting a portion of your interest payments into it, so that your monthly payments (from a cash perspective) are reduced. Balloons are usually a significant lump of your loan amount (eg. 30-50%), which is why they have the ability to reduce the amount of your monthly repayments in such a substantial way.

For example, if Daniel took out a $30,000 car loan for 5 years at 6% interest and had a (30%) balloon of $9,000, his monthly payments would be reduced from $579.98 (no balloon) down to $451.  At the end of his loan term, he would then have to pay the $9,000 sum left over in full.

It’s important to remember that while car loan balloon payments are helpful because they reduce your monthly repayments, they do in effect charge you more in interest across the term of the loan. Looking at Daniel’s case a little closer, we see that with a 30% balloon, Daniel’s interest costs are $1,260 more.

Cost of a $30,000 5 Year Car Loan at 6% Interest Rate (Excl. fees)
30% Balloon No Balloon
Monthly Repayments $450.99 $579.98
Total Repayment after 5 years (Repayments + Balloon) $36,059.40 $34,798.80
Interest Costs $6,059.40 $4,798.80
Cost Difference +$1,260.20

Source: Car Loan Calculator.

Why you might consider a car loan balloon payment

There are a number of reasons why someone might consider having a balloon payment on their car loan. The first is that the repayments are less per month when compared to a car loan with no balloon. This provides a lot more cash flexibility, particularly for people who may have other expenses to pay (or less income coming in) for the period of the loan. It can also have the added benefits of qualifying for a larger car loan amount.

A lot of people also consider car loan balloons because there is an option for them to trade in their car at the end of the term and use the proceeds to pay off the balloon. They can then apply for a new car loan to fund the purchasing of a replacement vehicle. This is quite common for business car loans.

What is the process when the balloon payment is due?

The balloon payment must be made as a lump sum once the car loan has expired. There are typically a number of options available once the payment is due.

  • If the borrower wants a new vehicle, they can sell the car and use the money to make the payment and finalise the loan. The borrower is then entitled to buy a replacement car and if they wish, apply for a new car loan to pay for the replacement vehicle. If the car is being traded in as a part of the payment for the new vehicle then the Balloon Payment can be included in this process.
  • If the borrower wants to keep the vehicle, they can make the payment in cash, roll over or refinance the payment into another loan.


Balloon payments in business car loans

Because of the flexibility of smaller monthly repayments and the opportunity to replace your car every three to five years, balloons are commonly found in car loans for business and commercial purposes. Reducing the monthly repayments on a car loan can help a business to manage its short-term cash flow more effectively, while the higher interest rate charges can be claimed as a tax deduction.

If you’re interested in taking out a car loan balloon payment for business purposes, it’s a good idea to consult a tax accountant or financial adviser to find out how it could benefit your business.

The Savings Lesson

Having a balloon on your car loan will not save you money, because you will have to pay a higher amount of interest across the life of the loan. However, it will provide you with the great flexibility of lower monthly repayments. Remember though that while it will help you save on your outgoing expenses during the term of the loan, there’s a lump sum that needs to be paid at the end of the loan. Make sure to shop around for a low interest rate before making a purchase decision and calculate your possible monthly repayments in advance using a car loan repayment calculator. 

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5 things to consider before refinancing your car loan

Whether it’s to secure a lower interest rate, add flexibility or consolidate debts, refinancing your car loan (switching from one loan to another) can be a useful step to take.

But as with refinancing a home loan, car loan refinancing does not suit every borrower. Here are five things you should consider before refinancing your car loan.

Car value

Before refinancing your car loan, it’s important to consider the value of your vehicle. Typically, this will not be the amount you paid for it. Cars are one of those purchases which generally lose value (depreciate) over time. If you owe more money to the lender than what your car is currently worth, you would likely be considered a higher lending ‘risk’ and might discover it difficult to find someone willing to refinance your loan. This is because if you defaulted on a payment and your lender had to seize your car and sell it, they probably wouldn’t get the full amount back that you owed them. So to ensure that you have a good chance of refinancing, have a good idea of what your car is currently worth and make sure it is more than what you currently owe.

Remaining Term left on your Loan

Car loan terms are almost always significantly shorter than home loan terms, with typical loan periods between one to seven years. You should look at your current loan length and decide if it’s worth the time, effort and potential cost of refinancing.  For example, if you only had a year left on your car loan, refinancing could end up costing you more in fees than if you were to complete the final year of payments.

In contrast to that, if you still had five years to go of a seven-year term and don’t believe you’re getting the best interest rate, it might be an idea to consider refinancing.

Get Across the ‘Change’ Costs

This goes hand in hand with your loan length and is a critical thing to consider before refinancing your car loan. Some of the costs involved in refinancing can include exit fees, valuation fees, application fees and break fees. For people who don’t have long left on their term, these types of costs could mean that they end up paying more in fees than what they will save by switching to a better interest rate.

Many lenders understand this and will from time to time make special offers to waive some of these fees, so it always pays to keep an eye on special promotions being offered in the car lending marketplace.

Case Study – Comparison of Kelly and Michelle’s car loan refinance

Both Kelly and Michelle have car loans of $30,000 over five years (with no balloon) repaying monthly at an interest rate of 6.44% p.a. Kelly has four years left on her loan whereas Michelle only has two years left on hers.

They both found a lender willing to refinance their loans at an interest rate of 5.44% p.a. (a discount of 100 basis points), with total refinancing costs coming to $90.

Kelly has done the calculations and found if she refinances her car loan and pays the $90 cost, she will still save $415 in interest over four years.

Michelle decided to refinance her car loan without investigating the change costs and found later that because she only had two years left on her car loan, she only saved $7 in interest over the two years after the refinancing costs of $90. For savings of only $7, Michelle may consider whether the time and effort she put in to change the loan over to the new provider was actually worth it.

Looking after your Credit Score

Another thing most people don’t realise is that every application they make for credit (eg. a loan) goes onto their personal credit file and can negatively influence their individual credit score. This might mean that refinancing your car loan too often could make it difficult to receive a good value interest rate on future applications of credit in other areas such as a home loan or a personal loan.

The interest rate market

Refinancing your car loan may be a good option if you really want a lower interest rate to drive cheaper repayment options, but it is important to consider whether refinancing your car loan will help you to make on overall net saving and in turn accumulate more money in the medium to long-term.

A quick look at the rates currently on offer in the marketplace for car loans (secured by the vehicle itself) shows that there is a near 9% difference (in the raw % comparison rate) between the highest and lowest car loan interest rate, so it’s important to shop around before making a purchase decision. Don’t forget, car loan calculators can help you figure out what your monthly repayments and total interest costs will be.

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5 Ways to Maximise your Term Deposit Earnings

If you are looking at the low-risk option of depositing money with a financial institution, a term deposit (TD) can be a good way of getting the most out of your money from a relatively higher rate of return than a standard savings account. As with other investment products, the rates on offer from term deposits will fluctuate with the market, but there are always things you can do to make term deposits work better for you and your money.

Here are five such measures you could take.

1. Pick the right term

When taking out a term deposit, it is important to think about the tenure, or length of your investment. The ideal tenure will depend upon how long you want to put your money away for and what rates the different ADI’s are offering for different tenures. Terms generally range from one month up to five years. There are a couple of things to consider when deciding on an appropriate term length.

The first is fluctuating interest rates. For example, if you lock in a six-month term deposit and interest rates go up, you’re potentially worse off than if you were to lock in a three-month term initially and then lock in a second three-month term at the new higher interest rate. The same applies to when interest rates are going down, except that the opposite logic applies here in that the longer term you go with for your term deposit, the better the outcome if rates go down during the period of your term.

Another thing to consider when deciding on how long you should lock your money away for is when you’ll need to access to it. Accessing money from a term deposit before it’s matured can incur penalty fees which can eat into the money you are going to earn from your term deposit. Surprises are always going to happen, but you can reduce the risk of having to sacrifice a chunk of your term deposit earnings by simply thinking through your upcoming money needs carefully and making sure that you do not have any upcoming commitments that are going to require access to the funds you are looking to invest in your term deposit.

2. Understand the ‘frequency’ of interest payments

A critical step before investing in a term deposit is understanding when the interest ‘earned’ is paid. Some term deposits only pay interest once at the end of the term while some pay monthly, quarterly, or even weekly (‘compounding’ over the course of the deposit).

Some term deposits also let you take the interest earned as a ‘payment’ into a separate account – while some simply add the interest earned onto the principal amount you invested – thus adding the compound effect.

If you choose to take the interest earning payment option, it can be accessed as soon as the payments are made into the separate account, sort of like a monthly ‘income’. This option is generally not offered on shorter-term deposits (between 1 and 3 months).

3. Zero risk

Something you may not know is that all authorised deposit-taking institutions (ADIs) are guaranteed by the Commonwealth Government up to $250,000. This means that if your financial institution goes bankrupt or anything happens during your fixed term,  the Australian Government will guarantee your term deposit. So investing in a term deposit with an ADI for less than $250,000 is effectively a zero risk investment.

If you are planning on investing more than $250,000 and you want to retain the protection of the government guarantee, you can still achieve the same zero risk outcome by breaking up your money into smaller sums of less than $250,000. Importantly, in order to fall under the guarantee, the smaller deposits must then be invested at different financial institutions.

4. Interest rate pricing

There is more to how ADIs price their interest rates than you might think.

As mentioned above, interest rates fluctuate with the market. While (at the time of writing) there hasn’t been any movement in the Reserve Bank of Australia (RBA) cash rate since August 2016, term deposit rates have actually moved around a bit during that period showing that for many ADI’s, the RBA’s cash rate is not the only factor which drives their term deposit ‘pricing’. Other factors, such as the level of market competition among these ADIs for term deposit business, can also drive term deposit interest rates up so it’s important to be aware of some of the things that could influence interest rates in the future.

5. Shop around

Last but not least, the easiest way to maximise your term deposit earnings is to shop around.  Different ADIs offer different interest rates with some offering promotional rates for new customers (much like what you often see in the high-interest savings account market). Even outside of any special promotions, a quick look at a large cross-section of rates available in the market (for a 6 month term deposit with interest paid at the maturity of the term) revealed a more than 1.2% difference in raw advertised rate from the highest to the lowest interest rate on offer! This is a lot given that most term deposits are pricing under 3% p.a. Do your research and make sure you read the Product Disclosure Statement (PDS) before making any financial decisions.

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Pros and Cons of Refinancing your Home Loan

Many borrowers are not even aware of what their current rate of interest is on their home loan, let alone whether it is competitive to what’s available in the market. But before you consider whether you should test the market, it is critical to know the ins and outs of refinancing your home loan to another lender.

Thanks to the internet, it is now easier than ever for people to shop around for a good deal on their home loan. Unlike the ‘olden days’ when it seemed like borrowers were stuck with one lender for their entire loan term, it is now very common for people to refinance their mortgage with a different bank or lender.

What is refinancing?

Refinancing is a term used to describe the changeover of a mortgage to a different organisation or account. It is often done when there are appealing benefits such as a lower interest rate, more flexible loan terms or debt consolidation requirements.

There are two main types of home loan refinance:

  • When you move your loan to another financial lender, it is called an external refinance.
  • When you refinance your home loan with your existing lender, it’s known as an internal refinance.

Like any financial product, refinancing does not suit every borrower. We have compiled a list of some of the pros and cons involved in refinancing your home loan.

Pros and cons of home loan refinancing


  1. Interest rate: one of the main reasons that people refinance is because they want a lower interest rate. Having a lower rate can not only reduce your monthly repayments, but potentially help you pay your loan off sooner and boost your savings long term.
  2. Equity Access: when you refinance your home loan, you will have access to any equity you have paid over the course of your mortgage. If you choose, this could be used for things like re-investing, renovations, taking a holiday, purchasing a new car and much more. However, before you go spending too much of your equity, it’s important to remember that the more equity you have, the better chance you have of getting the very best interest rate you can achieve from your new lender.
  3. Flexibility: when you refinance your home loan, you can lengthen or shorten the loan term (i.e. how many years it takes to pay off the loan) to suit your needs. By increasing your loan term, you can reduce your regular payments over a longer period of time. In comparison, by decreasing your loan term, you may increase your payments but pay less interest overall (by paying off the loan quicker).


  1. Fees: It’s important to do your research before you consider refinancing as there can be a number of fees involved. A few of these include exit fees, valuation fees, application fees, and break fees.
  2. LMI: If your equity is less than 20% of the property value, your lender may require you to take out Lenders Mortgage Insurance (LMI). This protects the lender if you default on your home loan, but could end up putting you seriously out of pocket.
  3. Credit Score: Most people don’t realise that every application for credit goes into their personal credit file. Refinancing your home loan often could impact your credit score which can make it difficult to receive lower interest rates for future applications.

It’s never too early

If you’re thinking about refinancing but have only just taken out a mortgage, it is still possible for you to do so. In fact, anecdotal evidence coming out of our sister company’s lending specialist team suggests that it is not uncommon at all for people to refinance their home loans within 3 months of buying their property! This makes sense if you think about it. Buying a home for most people really focuses on just that – the home or property. Very rarely does it involve spending more time (than looking for the right home) on finding the right home loan!

Ultimately, refinancing is not going to suit every person in every situation. It is important to look at your individual circumstances and weighing up all of the pros and cons before making a move to do so.

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