6 Booklet 6 of 6 · The end of a loan
Refinancing and discharging: taking a loan apart
A home loan ends one of two ways: it is paid out by a new loan (refinancing), or paid off. Either way, the borrower can ask for a written pay-out figure, the lender must give it within 7 days, and the mortgage then has to come off the title, which in Western Australia does not happen automatically.
Part A · Refinancing
Moneysmart’s four checks before switching
Moneysmart’s page on switching weighs any saving from a lower rate against what the move costs, and organises its advice around four checks. In summary:
Ask the current lender
A lender that wants to keep a customer may lower the existing rate, and that offer can be weighed against the alternatives.
Check lenders mortgage insurance
With less than 20% equity in the home, a new loan might carry LMI, which can outweigh the savings. Moneysmart suggests asking for a refund of some of the LMI on the current loan.
Check the other fees
Moneysmart’s switching home loans page lists the fees and charges to compare before switching.
Check the length of the new loan
A fresh loan term can quietly add years to what was left on the old loan, and more years means more interest.
Worked example
How long until switching pays for itself
Moneysmart’s mortgage switching calculator shows how long it takes to recover the cost of switching. The idea underneath is a division. The figures here are made up, and computed for this page:
| Line | Example figure |
|---|---|
| All the one-off costs of switching | $1,200 |
| Lower repayment each month on the new loan | $150 |
| Months to recover the costs ($1,200 ÷ $150) | 8 |
A lender assessing a refinance looks at the same balance. ASIC’s guidance says it should consider whether the new loan would give overall cost savings that outweigh any loss of benefits, taking into account the cost of switching and all associated fees, or whether it better meets the borrower’s needs for other reasons, such as a redraw facility. It should also obtain the details of the current contract and the borrower’s repayment history.
Part B · Paying out
Paying a loan out, in the Code’s order
The right to pay out
The information statement answers “Can I pay my credit contract out early?” with “Yes”: pay the credit provider the amount required on the day you want the contract to end. Interest depends on the time money is actually owing, though an early termination charge, if the contract allows one, and other fees may apply.
Ask for the pay-out figure in writing
At a written request, the credit provider must give a written statement of the amount needed to pay out the contract on the date specified, with a breakdown if asked, within 7 days. The statement must say the amount may change depending on the day it is paid. The information statement notes a fee may be charged for it.
Clear the title
Paying off the loan does not remove the mortgage from the title by itself: see the table below.
Final assembly
Taking the mortgage off the title
| State | What the official source says |
|---|---|
| Western Australia | Landgate explains that paying off a home loan does not by itself lead the lender to discharge the mortgage. The borrower arranges a discharge with the lender, and that document has to be lodged with Landgate before the title is clear. |
| Queensland | Titles Queensland lists “Form 3 – An instrument releasing a mortgage of a lot” as a mandated eConveyancing instrument, so it must be lodged electronically unless an exemption applies. |
Other states and territories run their own registries, each under its own land registry official, so the steps there are on that registry’s pages. When the mortgage is gone from the register, the loan’s last part is back in the box.