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When To Refinance Your Home Loan

Like many other Australian homeowners, you might be wondering when to refinance a home loan.

As life evolves, so do your financial needs, and your home loan shouldn’t be an exception. So it’s important to regularly evaluate whether your current home loan is still a good fit with your circumstances.

At the same time, Australia’s mortgage market is ever-changing – with new products, lenders and deals coming out regularly. So market changes can also prompt the decision to switch lenders.

But while refinancing offers a range of benefits – such as securing a lower interest rate, reducing monthly repayments, accessing equity, or consolidating debt – it’s not suitable for every borrower or circumstance.

So deciding when to refinance your home loan should always be based on careful consideration of your unique circumstances and financial goals.

To help, we’ll explore some of the key reasons why Australian homeowners refinance their mortgages.

Secure a lower interest rate

The higher a home loan’s interest rate is, the greater the monthly repayments. So it’s important to make sure you’re paying a competitive interest rate on your home loan.

The problem is, if you’ve had your home loan for a while, there’s a good chance you’re not. That’s because many lenders reserve their lowest rates for new customers to help win their business.

Refinancing to a lower rate could save you tens of thousands of dollars over the life of your loan. However, it’s crucial to consider the costs associated with refinancing, such as break fees, application fees and any ongoing fees, to make sure the potential savings outweigh the expenses.

Change in financial situation

Whether it’s a pay increase, a new job or a new baby, significant changes in your finances can make refinancing an attractive option.

For example, if you’ve recently received a promotion and now have a higher income, refinancing to a mortgage with a shorter loan term could help you become mortgage-free faster.

Or if your current loan doesn’t provide the flexibility you need, refinancing could help you access features such as an offset account, redraw facility or the ability to make extra repayments without penalties. These features can help you manage your loan more effectively and potentially save money on interest.

Then there’s your credit score, which has a direct impact on the interest rate you get charged on your home loan.

If you’ve improved your credit score since taking out your mortgage, you might qualify for a more favourable interest rate.

Refinancing with a higher credit score can lead to lower interest payments, ultimately reducing your total loan costs. To get your credit score in good shape:

  • Make bill and debt payments on time
  • Lower credit card limits and closer unused accounts
  • Avoid making multiple credit applications in a short space of time
  • Regularly check your credit report for errors

Access home equity

Home equity refers to the portion of your property that you own outright, calculated by deducting the outstanding mortgage balance from the property’s current market value.

Refinancing can be a way of accessing this equity and using it for other purposes, such as home renovations or property investment.

Consolidate debt

If you have multiple debts, such as credit card balances, personal loans or car loans, refinancing can be an effective way to consolidate them into a single loan

By combining your debts into your mortgage, you can streamline your finances and potentially reduce the overall interest paid. However, it’s important to be cautious and seek advice before consolidating debts, as extending short-term debts into a long-term mortgage may increase the overall interest paid.

How a mortgage broker can help

Refinancing your home loan can be a great way to improve your financial situation and achieve your goals. But every homeowner’s situation is unique, and what works for someone else may not be the best option for you.

By taking the time to understand your unique financial situation, goals and preferences, an expert mortgage broker can help you determine whether refinancing is the right move for you. Shoer Financial brokers have access to a wide range of loan products from different lenders and can help you compare options to make an informed decision.

Looking to refinance your home loan? Shore Financial can help you work out if it’s a smart move. Get started by calling us on 1300 416 700, emailing us on info@shorefinancial.come.au or filling in this online form.


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