Refinancing

When is the best time to refinance your home loan?

As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender who can better meet your current needs, wants and circumstances.

By refinancing you can also consolidate your debts or pay down your mortgage more quickly.

Another common reason borrowers look to refinance is so that they can access equity – the amount you’d get from selling your home after settling any associated loans, such as a mortgage on that property, and any other costs associated with the property. Depending on that amount, you may be able to access equity in the property without having to sell it, for example, to make home renovations or to buy an investment property.

Refinancing is not suited to everyone. There are many different factors you will need to consider when thinking about refinancing a loan. Before you start an application to refinance, your broker will need to assess your needs and objectives as well as your current financial situation.

How will you know that refinancing is the right option for you?

The first step is to speak to a professional, such as a mortgage broker, about your needs and whether you can afford a different loan structure or other change to your mortgage, particularly if you have more than one property.

Looking to pay less interest by refinancing?

Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, refinancing could potentially save you a lot of money in the long term.
While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.

At this point, the broker will need to find out about your existing loan, repayments and current loan structure.

Your mortgage broker will also need to find out more about your current financial situation, including your income, any other current debts and about any assets you own before offering advice on refiniancing.

The current value of the property is also taken into consideration, so your broker will have access to current data that will indicate what your property is likely to be worth.

Your broker will then review the various loan options and figure out whether it’s worth it for you to refinance. Sometimes it’s not worth refinancing if it’s only going to save a couple of hundred dollars a year, particularly when you take into consideration the exit and application fees involved. But if it’s going to save upward of $1,000 a year, refinancing might be a sensible approach.