Aug 24, 2020 / News

Lending and Finance

When is the best time to refinance your home loan?

As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender who can better meet your current needs, wants and circumstances.

Refinancing can allow you to consolidate your debts or pay down your mortgage more quickly.

Another common reason borrowers look to refinance is so they can access equity – the amount you’d get from selling your home after settling any associated loans, such as a mortgage, and any other costs associated with the property. Depending on that amount, you may be able to access equity in the property without having to sell it, for example, to make home renovations or to buy an investment property.

However, refinancing is not suitable for everyone. There are many different factors you need to consider when thinking about refinancing a loan. Before you initiate an application to refinance, we will need to assess your needs and objectives as well as your current financial situation.

So how will you know if refinancing is the right option for you?

The first step is to speak to us about your needs and whether you can afford a different loan structure or other changes to your mortgage, especially if you have more than one property.

Are you looking to pay less interest?

Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, this could potentially save you a lot of money in the long term.

While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.

At this point, we will need to find out about your existing loan, repayments and current loan structure. We will also need need to find out more about your current financial situation, including your income, any other current debts and assets you own.

The current value of the property is also taken into consideration, we will have access to current data that will indicate what your property is likely to be worth.

We will then review the various loan options and figure out whether it is beneficial for you to refinance. Sometimes it’s not in your best interest to refinance if it’s only going to save a couple of hundred dollars a year, particularly when you take into consideration the exit and application fees involved. But if it’s going to save you upward of $1,000 a year, refinancing might be a sensible approach.

In some cases, we can tell you if getting a lower interest rate from your current lender can be achieved without refinancing.

Do you want to change your loan type?

One of the risks of refinancing your home loan is that you may need to pay Lender’s Mortgage Insurance (LMI)1 to your new lender. If switching your loan means you will need to pay LMI again, it may not be worth refinancing.

If you do decide to go down the refinancing path, working with us rather than going straight to a lender has advantages. We generally have access to loan options from a range of different lenders (on average 34 lenders), and if there’s a better opportunity for you, they’re usually able to access it.

It is important to consider that when you take up a new home loan, it can incur exit fees and may not have all the features you can access with your existing home loan.

Have your circumstances changed?

If you had a recent major life change such as a loss of income or a change in marital status, you might be looking to refinance.

If you want to refinance to lower lending costs and manage your monthly repayments, we can negotiate with your current lender for a rate suitable to your current situation.

We can also help you look at alternate options to consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments, or help you keep your repayments on time and even save you interest in the long-term. 

How can Nexia Edwards Marshall help you?

If you have any questions about refinancing your mortgage or would like more information about what home loan options are available on the market please contact your Nexia Edwards Marshall advisor who can refer you to one of our Mortgage Broking specialists for a complimentary consultation.

1 LMI protects the lender against potential loss. 

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.