Refinancing your home loan can provide you with a considerable amount of flexibility, depending on your financial situation. However, it’s important to understand when to refinance your home loan to ensure you’re making the move at the right time and for the right reasons. Let’s look at the circumstances when refinancing your existing loan makes sense.
Key Takeaways
▸ Regular reviews help ensure competitiveness, especially if your fixed-rate period is ending, fees are becoming a burden, or you’re missing key features.- ▸ Refinancing with a different lender can offer lower repayments, shorter loan terms, and better equity access.
- ▸ Expert support: Our team has the experience to help you find a suitable home loan for your situation.
Reviewing for a better deal
It’s worth reviewing your home loan on a regular basis to ensure that the terms of your current mortgage are competitive in the current financial environment. As a rule of thumb, most people benefit from undertaking a review every one to two years. Here are some factors to consider.
Equity in your home
Has your home’s value changed? With enough equity, you can qualify for better rates. However, if you have less than 20% equity in your home, you would need to pay lenders mortgage insurance (LMI) if you choose to refinance. LMI may be avoided with a third-party guarantor after they seek independent legal advice.
Loan features
Does your current lender provide the flexible features you need? A new loan could offer advantages such as a redraw facility or an offset account. You may also get better repayment amount options. For example, you can save money by having the ability to make additional payments.
Current lender’s fees and charges
Charges such as early repayment fees, break costs, closing costs, and switching fees can build up over your loan’s term. You can often negotiate with a new lender to get fee waivers. This can have a significant impact when you can avoid:
- Settlement fees.
- Exit fees.
- Application fees.
- Redraw fees.
Interest rates
Interest rates are constantly changing. Is your fixed-rate loan ending and transitioning to a higher variable-rate loan? Look at whether there are better interest rates available to reduce mortgage repayments. You may also find that your credit provider isn’t passing on rate cuts from the Reserve Bank of Australia. That can be a sign to look elsewhere.
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When to refinance home loan repayments
There are many reasons why people choose to refinance their home loans. Approaching a mortgage broker with the appropriate Australian credit licence can assist you with switching home loans to benefit your financial position. There are some common circumstances when refinancing makes sense.
- Lower interest rate. One of the most common reasons to refinance is to improve a borrowing rate. If your fixed-rate home loan was set higher in the rate cycle, you may be able to find a more suitable arrangement.
- Debt consolidation. Dealing with multiple debts, such as credit cards and other personal loans, can be difficult. Rolling them into your home loan can make monthly repayments more manageable and decrease interest payments.
- Cash-out refinancing. Refinancing your home loan can allow you to access the equity in your home. This can allow you to finance purchases such as an investment property, a car, or completing renovation plans. Cash-out refinancing enables you to avoid further liabilities such as a car loan.
- Reducing the loan term. With an improved credit history and increased income, refinancing can allow you to seek a shorter loan duration. Paying off the mortgage amount faster lowers the total interest paid, resulting in cost savings.
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From our clients
Thanks Cheyenne for guiding and supporting us through this process, I feel like we had to do very little other then read and sign. We were able to trust you from the start which has made the experience far less stressful
– Russel
Our team has decades of experience helping clients switch lenders to a particular credit product that suits them. We help you understand the best comparison rates so you keep more money for your future. With our lending expertise, we can review your current home loan and help you explore more suitable refinancing options.
Conclusion
Whether you’re on a fixed-term loan or a variable rate, it’s helpful to consider your options. Regular reviews are useful for determining if refinancing is appropriate. There are many financial situations when refinancing can provide significant benefits. With the right advice, you can make the most informed decision.
Book a no-obligation loan review today.
