- Posted 16 Mar
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When you refinance your home loan, you’re changing the terms so that your mortgage can be more cost-effective for you, or to access funds to either renovate or buy other property.
If this is something you are looking into doing, the frequency of your refinancing is something you should take into account, you definitely don’t want to be doing this frequently, as it could cost you a lot in fees. Follow our tips below to figure out when is a good time to refinance your home loan.
What’s common in Australia?
The days of people sticking with a home loan for the full 25 or 30-year term are long gone, especially in Australia. A typical homeowner will change home loans almost every four or five years. People are always looking for a better deal, and rightly so!
Certainly, homebuyers have of late, been seeing the lowest interest rates in quite a long time. This shouldn’t be interpreted as carte blanche to seek out new financing terms however. There are some crucial things to consider when refinancing, such as:
1. Checking rates:
As a homeowner, you should be checking your home loan every year or so, to make sure that you are getting the best interest rate you can get. Be aware of the market, so that you can make a proper decision as to whether to refinance or not. Compare rates and see which lenders are competitive and chat with a mortgage broker about your options before you do anything.
2. Some things to consider:
- Cost. Refinancing is, of course, a way to save money, but there are costs involved in the process. Be aware of all the associated costs, and factor these into your budget for the refinance. Will the costs spent outweigh the potential savings?
- Are you locked into a fixed rate? If so, choosing to break the agreement could add extra costs. These can be significant depending on how far into your term you are and the size of your loan. Double check before you do anything.
- Interest Rates. As mentioned earlier, always be aware of the fluctuations in interest rates. If you begin to see rates that are .5% less than the interest rate you already have, this is the time to start thinking about refinancing. At the very least, seek out the guidance of your loan professional about getting a better rate.
- Have you’re needs changed? As you and your family grow, you need to assess whether or not the loan you have currently is still right for you. Does it have the flexibility you need? Look into products, such as an offset account to reduce interest. If you have an investment property, look into an interest only home loan. If you might need a renovation in the future, refinancing can be a good option because you will need access to more equity.
3. Before you commit
If you’ve taken all the above into account and are ready to sign on the dotted line of your new home mortgage, be sure to do the following:
- Be totally clear on what your current interest rate is and that you’re actually getting a better deal.
- Do some long term planning—what are your goals for the next year, two years, and five years?
- Talk to your home loan professional and be clear about the best rate you can get and especially the costs that will be involved in getting out of your current loan.
- Get a second opinion. You always want to make sure you are getting the best deal, which is why working with a mortgage broker is often in your best interest, as they can present you with multiple options.
With these tips in mind, you’ll be better equipped to know when its time to refinance. If you’re ready, it can be your ticket to a more economical future and some serious savings.
Need help figuring out what your best options are moving forward? Chat to our home loan experts today and take the next step in refinancing for a better interest rate.