Home loan security swap vs refinancing when you move

When you sell one home and buy another, you don't automatically need a brand new home loan. You may be able to swap the security on your existing loan to the new property, or refinance to a different deal altogether. Here's how the two options work, and how to think through which one suits your move.

What a security swap actually means

A security swap means keeping your current loan, including its interest rate and features, and simply transferring the security from your old home to your new one. It's essentially the same loan, attached to a different property. Most lenders that allow it require the sale of your old home and the purchase of your new one to settle on the same day (simultaneous settlement).

When a security swap can help

• You're on a competitive rate you don't want to lose, particularly if rates have moved up since you took out your loan.
• Your loan is on a fixed rate with time left on it, and a security swap can help you avoid the break costs that would otherwise apply if you paid it out early.
• You like your current lender's features, such as an offset account or redraw, and don't want to reset them with a new loan.

The limits of a security swap

• Simultaneous settlement is usually required, and lining up two settlement dates can be genuinely hard, especially if either side of the transaction shifts.
• Not every loan or lender allows a security swap, and it's generally not available if you're increasing your loan amount without separate approval, or if your circumstances have changed since your original loan was approved.
• Even if the security can be swapped, your borrowing capacity is reassessed against the new property, so approval still isn't automatic.

Security swap vs refinancing

Refinancing means closing out your current loan and starting a new one, potentially with a different lender, rate or set of features. It can be worth considering if your current loan no longer suits your situation, a better rate is available elsewhere, or you want to release equity for another purpose. As a rule of thumb, a security swap tends to suit people who are happy with their current loan, while refinancing suits people chasing a genuinely better deal or more flexibility.

How to decide

• Start with your settlement timing, since simultaneous settlement is often the deciding factor in whether a security swap is even possible.
• Compare your current rate and any potential break costs against what's available if you refinanced.
• Weigh up the features you might lose or gain, like an offset account or redraw facility.

Every move is a little different, and the right call between a security swap and refinancing comes down to your rate, your timing and what you want the loan to do next. If your settlement dates can't line up, a security swap usually isn't an option, and bridging finance is the alternative to weigh. A quick conversation early on can save you from discovering too late that your timeline doesn't work, and we cover the full range of options for movers on our next home loans page.

Frequently asked questions