If you’ve had your home loan for a number of years, it’s likely your needs have changed, or that your loan does not have flexible features or add-ons that have since become available.

Refinancing involves paying out your current mortgage with a new loan. When organizing the new loan, you can choose a different product or a better interest rate, change your loan term, have an offset account, reduce your repayments -or make extra payments- and own your home sooner. It allows you to set up the best fit for your circumstances.

Why refinance?

There are a number of reasons to consider refinance, such as:

  • To get a more suitable interest rate, or new features such as flexible repayments, redraw facilities or an offset account
  • To access equity in your home to renovate, invest or travel
  • If you’re coming to the end of a fixed rate term, and you want a more suitable interest rate or a more flexible home loan
  • To consolidate debts such as a personal loan, car loan or credit card into your mortgage, so that it’s easier to manage your finances.

If you feel any of the above apply to your situation, consider refinancing. Before you start though, look for these four things:

  1. What’s it going to cost you?

Make sure you understand the terms and conditions of your existing home loan and the loan you’re looking to refinance with so you know what fees will come with the change e.g. discharge fees, valuation fees, and break costs.

  1. What are the loan features?

A loan with a cheaper rate isn’t necessarily going to be the ‘best ’ for you. When refinancing to find a better deal, you should consider features like a redraw facility or an offset account that may help you pay your loan off.

  1. What are the term conditions?

Keep in mind the new term you’ll be moving to, as it could be that a lower interest rate comes with another 15-30 years to pay off that loan, usually increasing the interest you’ll pay over the life of the loan.

  1. How flexible is the home loan?

It’s worth researching whether the home loan you’re applying for offers any relief or concessions during times of hardship. For instance, there are lenders that offer Compassionate Care Loans, which is protection for eligible Owner Occupied home loans that support you by paying your home loan repayments for around 12 months if an eligible borrower, spouse, or dependant passes away or is medically certified with a terminal illness.

Other flexible features include if the home loan has the choice to split repayments between fixed and variable rates, this will allow you to manage your income.  Also, check if the home loan allows you to make extra repayments without penalty, so you’re not paying more for a service. 

When you’re thinking of refinancing your home loan, careful consideration of these four factors may be of great financial benefit to you in the long run. 

If you’d like to discuss your options when it comes to refinancing, schedule a chat with our home loan specialist.