When you should refinance your home loan

Refinancing your mortgage could be an option for you. Refinancing involves replacing your existing home loan with a new one in order to secure a more competitive interest rate, reduce your repayments, consolidate your debt or access more flexible loan features.

A few reasons you might choose to refinance:

To secure a more competitive deal

You might be able to move into a loan with a lower interest rate, reduce the value of your repayments each month and give you the ability to pay off your loan sooner.

To access flexible home loan features

You may benefit from accessing certain home loan features such as an offset account or redraw facility.

An offset account is essentially a savings account attached to your home loan which helps you reduce the amount of interest you pay each month. The balance held in this account "offsets" the balance in the mortgage, helping to reduce the interest paid and overall term of the loan.

A redraw facility is a home loan feature that’s attached to your mortgage and gives you the opportunity to make extra repayments on your home loan – which helps to reduce the interest costs.

To consolidate debt

You may have taken on other debt since you got your home loan such as credit card, personal loans or a car loan. Refinancing may present the opportunity to consolidate your debt into one loan.

To switch

You might want to switch from a fixed rate to a variable rate home loan. If you’d like to take advantage of the low interest rates currently on offer, or you want to increase your cash flow - you may want to consider a fixing the interest rate on your mortgage. This provides you with repayments certainty each month.

Variable loans on the other hand, can help you pay off your home loan sooner however, you ‘re at the mercy of your lender, the Reserve Bank and the market when it comes to your interest rate with this product.

Things to consider...

It’s important to factor in the costs associated with refinancing as you may incur discharge fees when moving from your current loan:

• Establishment fees when starting the new loan
• A valuation fee which the lender may charge in order to have your property valued by a professional property valuer
• Break costs associated with leaving a fixed home loan before the term date 
• A settlement fee which the new lender may charge in order to pay out your current mortgage

Is your home loan due for a health check? Get in touch with your local Mortgage Choice broker and find out if we can save you time and money on your home loan through a FREE Home Loan Health Check.

Think this might be the right move for you?

To identify whether or not refinancing is the right option for you, the best thing to do is to get a home loan health check and see if your home loan is still the right mortgage product for your current financial situation and your short and long-term goals.

Refinancing a home loan has become more complex recently as Australian lenders have tightened their lending criteria. For this reason, it’s critical you speak to a mortgage professional if you’re considering moving into a new home loan product. Your local Mortgage Choice mortgage broker can assess your existing loan and have a conversation with you about your current financial situation and your goals in order to determine whether there may be a more suitable home loan product for your needs.