When Should You Refinance A Home Loan?

With today’s cost-of-living pressures, it’s more important than ever to regularly review your home loan to see how it stacks up against others.

To refinance could allow you to find a more competitive mortgage and save you a lot of money over the course of your loan.

However, before you switch lenders, here are a few questions to ask yourself before refinancing.

What’s the refinances costs versus the benefit?

When deciding whether to refinance, you need to understand all of the costs involved and weigh those up against the money you could be saving.

Here are some of the costs you may encounter:

• Discharge fee from your existing lender
• Mortgage registration fee to register your new home loan
• Fixed loan break fee for those on a fixed-rate loan
• Exit fee by your lender when you break the term of your loan agreement
• Settlement fee with the new lender
• Property valuation for the new lender
• Lenders Mortgage Insurance if you’re borrowing more than 80% of the property’s value; and/or
• Title search fee, so your lender can ensure that there are no outstanding claims on your property

Which loans will suit your circumstances?

Think about what kind of home loan will work for you, given your current financial situation and goals.

If you want to lock your interest rate in and know exactly what your repayments will be for the fixed period, a fixed term home loan may suit you.

If you’re banking on a cash rate cut in the future, you may decide a variable home loan is the way to go.

A split loan means you get the best of both worlds in the sense that some of your home loan is fixed, and some is variable.

Also, consider which interest-saving features you’d like with a home loan. A redraw facility or offset account, for example, can save you interest in the long run. Making bigger or more frequent repayments may also help you pay off your loan sooner.

Try our home loan calculators to work out your repayments and borrowing capacity.

Do you want to increase your loan?

If you’re refinancing, it’s a good opportunity to consider whether you want to top up your loan.

Perhaps you’ve been planning a renovation and need some extra funds to get your reno dreams off the ground? Maybe you want to buy an investment property or get a new car?

Refinancing could allow you to access additional cash to achieve your goals. 

Would you benefit from debt consolidation?

If you’re juggling multiple debts at once, such as a personal loan and credit card debt, it may be worthwhile considering debt consolidation.

With debt consolidation, you essentially roll all your debts into your home loan. It means you only have to make one repayment, making it easier to manage your debt.

It’s important to remember that you may end up paying more interest over the life of the loan if you go down this road, so speak to us and we’ll crunch the numbers for you.

ARTICLE CREDIT: Finance Focus