Should you refinance your mortgage?

September 14, 2015
Melinda Halloran

Have you been thinking about refinancing your home loan, but aren’t sure whether now is the right time?

Whether your circumstances have changed and you need a new loan or you are simply curious about whether you are getting the best deal, refinancing can help you save money on your home loan.

Why should you refinance your home loan?

There are a number of reasons why home owners and property investors choose to refinance. These include:

  • Accessing finance for renovations
  • Securing a better interest rate to lower your monthly repayments
  • Gaining extra features such as an offset account or redraw facilities, to give you greater flexibility
  • Consolidating debts such as personal loans, car loans or credit cards into your mortgage
  • Financing a large purchase such as a car
  • Switching from a variable rate to a fixed rate for peace of mind
  • Using equity to invest in property or other investment opportunities

So whether your situation has changed and you need to access more money, or you simply want to reduce your monthly repayments, refinancing can help you work towards your financial goals.

When you are refinancing, it is important that you make these goals clear to your lender or mortgage broker, so they can find you a loan that will best match your needs.   

When is the right time to refinance?

It is a good idea to review your home loan every 12–24 months, to make sure your mortgage is still the best one for you. You should do this at the same time as you are reviewing your long-term financial goals, so that you know exactly what you are looking for.

Refinancing can reduce your monthly repayments or give you the flexibility you need to pay off your home loan sooner, which is why it is important to set goals before beginning the process.

Many home owners also review their mortgages when their circumstances change. Should you get a promotion, start planning a family or want to upgrade your home, there may be a better loan to match your situation.

The costs of refinancing

If you are refinancing to save money, you need to be mindful of the costs of switching home loans, as you may be charged fees for exiting and establishing loans. These costs will depend upon your lender and when your loan was taken out.

Refinancing costs can include:

  • Exit fees (for loans taken out before 1 July, 2011)
  • Break costs (if you exit a fixed-rate loan before the fixed term expires)
  • Loan application and valuation fees
  • Loan settlement fees
  • Lenders mortgage insurance
  • Transfer duty (stamp duty)
  • Loan service fees

Compare these costs with the long-term savings you stand to make. As a general rule, a 0.5% saving on your home loan rate will mean you come out in front.

Ask your lender or mortgage broker for help calculating these figures, so you know exactly where you stand.

Researching a new home loan

When you are looking for a new home loan, enquire with lenders other than the one you are currently with. Ask them about loan features and flexibility, interest rates and the costs of switching and maintaining your new loan.

If you are considering fixing interest rates, read the conditions of exiting the loan before the end of the fixed period.

Get a free home loan health check

Researching your loan options can be overwhelming, but I can help you weigh up your options with my free home loan health check service that compares hundreds of home loans for you. 

With interest rates currently sitting at historically low levels, there is a lot of competition amongst lenders. This means that if you haven’t reviewed your loan in some time, you could stand to save on your mortgage.

Start by comparing home loans or calling me on 0419 733 862 to discuss your options.

You may also be interested in:
Three ways to save money on your mortgage
Fixed vs variable home loans 

Luke Cashin
0419 733 862
Your Garden City Mortgage Broker, Brisbane

Posted in: Refinancing

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