If the terms, ‘refinancing or transferring’ your bond are new to you, but you’ve heard that these actions could help alleviate your current financial circumstances, then this guide is for you. Before diving into the benefits and challenges that you should take into consideration, let’s recap what these terms mean.  

Refinancing refers to when you apply for a new bond on your home based on its current value, rather than the value it had when you took out your original bond. When you refinance your bond, you renegotiate the terms of your existing bond in hopes of securing a lower interest rate, access equity, or to change the bond’s repayment period. 

On the other hand, you could also transfer your bond. This action, which is also sometimes referred to as ‘bond switching,’ involves moving your home loan from one bank to another. Typically, homeowners do this so that they can take advantage of better interest rates or other benefits. 

Whichever option you choose, it’s essential to weigh the pros and cons against your long-term financial goals. 

Why Would You Pick Either? 

Refinancing or transferring your bond is often thought of as a great option for those who want to improve their loan terms. For instance, if you want to extend your payment period so your monthly payments are lower or enjoy lower interest rates, then exploring both actions could be the answer.  

Here are a few scenarios why you would pick either: 

• Gain access to your home’s equity. 

• Take advantage of lower interest rates. 

• Switch from fixed-rate to a variable rate (or vice versa) so you can meet your financial goals. 

• Shorten or extend your bond terms.  

• Consolidation your debt and make the repayments more favourable. 

• Enjoy better customer service and more flexible payment options. 

• Lower monthly repayments and alleviate financial stress. 

• Take advantage of special offers or rebates from other banks. 

Comparing The Wins  

Transferring Your Bond	Refinancing Your Bond
Competitive Rates – Transferring your bond can result in better interest rates and save you money over the bond term.	Lower Interest Rates – If interest rates have dropped, you could save money over the bond’s term.
Incentives – Possible reduced fees or cash-back deals could be up for grabs.	Access to Equity – If you’ve built up equity, you could access these funds when refinancing.
	Flexible Terms – You could adjust your repayment period and reduce your monthly payments or shorten the bond’s term.

Comparing The Disadvantages  

Transferring Your Bond	Refinancing Your Bond
Transfer Costs – There may be costs, like legal fees and penalties for early repayment.	Costs – Refinancing comes with legal fees, valuation fees, and potentially penalty fees for settling your existing bond early.
Time-Consuming – This process can take some time, so be prepared for a few weeks until everything is finalised, and don’t forget the 90-day notice period with your original bond holder.	Longer Debt Term – you could end up with a longer debt term, meaning you’ll pay more in interest over time.
Credit Score – New lenders will check your credit and multiple credit checks in a short period can slightly impact your credit score.	Credit Score – Applying for new finance can temporarily impact your credit score.

Consider The Costs 

It’s important to weigh up the costs associated with refinancing or transferring as these could outweigh the savings you’re hoping to stack up. These costs typically include bond registration, early settlement fees, or transfer costs, as well as possible legal and administrative fees.  

While the benefits are certainly tremendous, it’s vital that you assess your financial situation and long-term goals carefully before making any changes to your bond. 

Feeling Informed? 

Refinancing or transferring a bond can be a complex and sometimes expensive process, however, once you have assessed the pros and cons, you’ll be able to make an informed choice.  

Don’t forget that AA Inform offers a variety of property tools and resources, including our home affordability calculator and free property valuation reports. Tools like these can help you to assess your home’s worth accurately and get true insights into properties of interest to you.  property tools and resources, including our home affordability calculator and free property valuation reports. Tools like these can help you to assess your home’s worth accurately and get true insights into properties of interest to you.