Here’s a seven-step guide to deciding whether you should refinance your home loan and, if so, how to follow through.

1. Take a minute to compare

If you can refinance a loan with just a 0.5 of a percentage point discount on your existing rate you could save as much as $28,000 on a 25-year, $300,000 loan. Even if you don’t have long left on your mortgage it might be a good idea to see what you could get elsewhere. Look at your fees: a monthly ongoing fee of $40, compared to one of $10, will cost an extra $9000 on the above loan. If you were to put that saving back into the same mortgage loan you would shave 11 months off the term of the loan.

2. Look outside the big four

The big four might be familiar but there can often be a better deal to be had elsewhere. Infochoice compares the average of the best four advertised standard variable home loan rates against those of the big four. In February 2011, the best-four average was 6.96 per cent compared with an average of 7.79 per cent for the big four. The rates at non-bank lenders can be much better but can also carry higher exit fees – an average of $2372 compared with $582 for the banks.

3. Check fee details

Exit fees may be banned from July 1 2011 but that is only on new loans. So if you’re looking to change an existing loan within the period that they apply – usually three to five years – you could still be up for a significant exit fee. The new ban does not cover discharge fees, although these are much smaller – $279 on average for non-bank lenders. The government has deemed that on any loan, old or new, banks cannot rebadge fees nor can they be “unconscionable”.

4. Make the decision

Once you’ve done the maths and made the decision to switch, you need to bite the bullet and contact your bank. If they’re a good lender they may try to talk you into staying and perhaps offer you a better rate. All the factors we’ve just discussed need to be considered. Plus whether you want to stay with a provider that values your business only when you threaten to go. Sometimes the new lender may be able to make the difficult “break-up” task a little easier if you call them first ...

5. Contact your new provider

Some providers – such as Newcastle’s Greater Building Society – will do the dirty work for you. If you fill out a form with your and the loan’s key details on it and give them the authority to act on your behalf, they will carry out the transfer for you. A Greater spokesperson says it can be done in just 24 hours. ANZ reports that it treats refinancing customers the same as new ones but finds other institutions “sometimes” hold loans for as long as possible.

6. Do the paperwork

Your refinancing amount will be a sum you obviously need to obtain from your existing provider. It will be the amount you want to take your new home loan out for and you will need to fill it in on the application, which is very much like, if not exactly the same as, a new home loan application. Your new provider will then contact your previous lender to confirm this amount, while your previous provider will let you know the amount of your exit fee and discharge fees.

7. Organise date for settlement

Just as with a new loan, you (that is, your new provider on your behalf) will have to organise a settlement date but this needs to be done with the other financial institution as well. Generally the time it takes to transfer a loan is 10 to 14 days but companies such as First Title are offering fast refinancing services, which speed up the process. They provide title insurance to the lender which enables the fast transition. Ask your new lender if they use such a service.