Refinancing My Home Loan

Refinancing My Home Loan

The year 2020 saw a surge in homeowners choosing to refinance their mortgages. In fact, refinancing increased by a phenomenal 63.1% during the past year (based on year-on-year figures), spiking by almost 30% during April/May alone. 

So, what sparked the sudden interest in refinancing? Were everyone’s fixed-rate periods abruptly ending? Did they all decide they wanted to renovate? Or are there other reasons to consider refinancing a home loan?

What should I know about refinancing?

Refinancing is when you decide to change your home loan. Most of the time this involves switching lenders, but it may also refer to a change in home loan product (i.e., same lender, different deal). When you decide to refinance, your new home loan pays out the balance of your existing home loan.

And while it’s true that many people choose to refinance as a result of promoting factors (changed circumstances, a desire to access equity, the end of a fixed-rate period), this doesn’t mean that you can’t be a little more proactive. 

At Professional Lending Solutions, we recommend that the average homeowner consider refinancing every two years. Why? Because things change. Rates change. New deals become available.

Particularly in a post-COVID climate (where interest rates are at historic lows), if you’ve been with your current lender for more than two years, then chances are you’re no longer getting a good deal. You could even be paying thousands of dollars more on interest than you need to. 

Is refinancing every two years really necessary?

Depending on the details of your specific loan and your current financial circumstances, it may not be necessary for you to refinance quite this often.

If you’ve got a great rate, a set-up that suits your needs, you’ve only recently changed employment or if the money you’d save on interest was going to be cancelled out by high discharge fees, then it’s probably not the right time for you to refinance. 

But how will you know unless you review your options? This is why we recommend that you have a mortgage check-up every two years. Our mortgage brokers can review your situation and provide expert advice on whether or not refinancing is going to be in your best interests.

If we think you’re better off staying put, then we’ll tell you. Reviewing your home loan will cost you nothing and will give you peace of mind that you’ve still got a great mortgage product.  

Why should I refinance my home loan? 

There are a number of reasons to consider refinancing, including: 

  • Lower Interest Rates: Interest rates in Australia have dropped substantially over the past two years, with the official RBA cash rate now sitting at just 0.10%. As a result, most lenders are now offering substantially better deals. To get an idea of how much money you could save by refinancing to a lower rate, try using our free online calculators
  • Debt Consolidation: If you’re struggling to juggle a large amount of personal debt (such as high-interest credit cards or vehicle loans), then refinancing could enable you to consolidate this debt into a more manageable monthly repayment. 
  • Better Features: The right loan features to suit your needs will likely change over time in line with your circumstances. You may find that you’d now like an offset account, redraw facility or the ability to make additional repayments. Refinancing can help you gain access to the features that will be of most use to you. 
  • Accessing Equity: If the value of your property has increased over time, then refinancing can enable you to draw on that accumulated equity. This could help you to purchase a much-needed new car, finance a renovation or even act as a deposit on an investment property. 

To find out more about whether refinancing is right for you, make a time to speak with Phil Verheijen.