When Is Home Loan Refinancing the Right Thing to Do?

Key Takeaways:

• Refinancing your home loan can offer a range of opportunities.
• Seek lower interest rates or change your current lender.
• Change to a fixed-rate loan, variable loan, or split-rate loan.
• You could save money on mortgage repayments when refinancing.
• You may have to pay costs and fees when refinancing.

Do you know the right time to reapply for a home loan refinance? Do you worry about existing lender break fees or meeting new lending criteria for refinancing?

As interest rates rise, leading experts recommend that you switch your home loan lender now. Take advantage of any great rates currently left on the market and secure a fixed loan rate now!

Here is everything you need to know about home loan refinancing and when refinancing is the right decision to make.

What is refinancing?

Refinancing occurs when you change your home loan, usually to get a better deal. Perhaps there is a new loan with a great interest rate tempting you to switch?

You could save money on your monthly repayments if you refinance at the best time. Although, every home loan is different, and every borrower possesses a set of unique circumstances.

Why should I refinance my home loan?

Most people refinance their home loans to improve their financial circumstances. You may want to save money on your monthly repayments by finding a home loan deal with a competitive interest rate.

Or, you may want to change the type of loan you currently have or change the lender. Perhaps you need to consolidate existing debt, or you want to extract equity out of your home?

Lendstreet experts are specialists in finding the perfect refinancing deal for you! We make home loan refinancing easy!

Check out Lendstreet’s Refinancing Calculator to discover a range of attractive options.

Here are the top reasons why you may decide to refinance your home loan: .

1. Pay less interest

A competitive interest rate means lower monthly repayments! If your home loan terms mean you are free to refinance, search for a better home loan deal. The savings you make could be substantial, saving you hundreds of dollars per month!

2. Change type of loan

Is your home loan a fixed loan, a variable loan, or a split-rate loan?

A fixed loan is fixed for a set period, ensuring you know exactly how much your repayments will be. Some fixed loans come with a higher interest rate and exit fees to pay if you switch too soon.

A variable loan does not have a fixed repayment each month. The amount you pay in instalments may fluctuate, providing a degree of unpredictability for your bank balance!

A split-rate loan enables you to enjoy the benefits of both fixed loans and variable loans. A portion of your home loan will be fixed, offering you reliability and some security.

The remainder of your home loan will be variable. This allows you to enjoy declining interest rates when applicable but prepare for increasing home loan repayments. Remember to check for any exit fees before refinancing!

You may decide to change the type of loan from a variable to a fixed loan for more security. Perhaps an interest rate rise is on the horizon, and you want to know how much your repayments will be.

Or, perhaps favourable interest rates are expected soon? You may want to change from a fixed to a variable-rate home loan.

Alternatively, you could wish to switch from a fixed or variable home loan to a split-rate loan.

3. Principal and Interest Repayments

Are you paying both principal and interest repayments on your home loan? You are, therefore, paying a chunk of money off the actual money you borrowed each month and paying lender interest.

You may want to change your home loan so that you are only paying the interest on your home loan. No money will come off the money borrowed, but your lender will receive their regular interest. This is one way to reduce your monthly outgoings!

Conversely, you may currently be paying interest-only, but you now want to switch to paying principal and interest repayments. Whilst your repayments will increase, you will begin to pay off the money you borrowed from the lender. Your equity in the property will then begin to rise.

4. Switching lenders

Did you know that you can change the lender your home loan is with? You are not tied to the lender for the duration of the home loan if you wish to switch to a different lender.

Lenders may lose your custom if the experience they are offering is not favourable. Other lenders may attract you with the methods they use to interact with their customers.

Different lenders will offer different home loan products and different rates and features. Does your lender offer a redraw facility or offset accounts? A lender may offer specific incentives for your home loan portfolio if you have more than one property.

Lendstreet can find the best lender to meet your needs, so contact your professional broker today!

5. Extract equity

When your property is valued, that amount minus the home loan amount is your equity. That is the money you have in the property once the home loan debt has been repaid.

Over time, as property values increase and your principal repayments reduce the home loan borrowed, your equity will rise.

You may decide to withdraw some of the equity out of your home for a specific purpose. Refinancing your home loan can mean that you can extract cash out of your equity. The amount you owe the lender will, of course, increase. As will your repayments per month.

6. Reduce the loan term

Did you take out a 30-year mortgage but now want to reduce the term so you can pay off the debt faster? Most loans will limit the extra payments you can pay per year, so refinancing may be the better option.

Reducing your loan term through refinancing can save you many years of interest! You may have to pay higher repayments in the short term, you could save thousands of dollars in the long term!

7. Refinance rebates

Lenders want your custom! They will offer incentives to snatch you away from your current lender, such as a refinance rebate. You may be able to receive a cashback amount when switching to a new lender, making refinancing a very attractive proposition.

8. Borrow more money

Refinancing will help you to borrow a greater amount of money than you initially borrowed.

For example, you initially borrowed $250,000 on a $500,000 property and want to increase the borrowed amount to $350,000. Your repayments will increase, but you can take out the additional funds to spend how you want!

Does refinancing hurt your credit?

Refinancing may affect your credit score slightly, although, over the long term, it may improve your credit!

When you are refinancing, you are replacing one loan with another loan. If you reduce the loan terms or lower your interest rate, your credit score may eventually increase.

The slight dip in credit score may come from the credit enquiries taking place when you make the refinancing application.

Is it worth refinancing?

It is only worth refinancing your home loan if it helps you meet a goal or an aim. Why do you want to refinance? Are you looking to reduce your monthly repayments by securing a lower interest rate? Do you need to get cash out of your home?

If refinancing will help you achieve your monetary goals, then it is a great option. It can be difficult knowing if you are making the right decision, however. Seeking professional advice from broker experts at Lendstreet could ensure you make the best choices for yourself!

You will have to factor costs into your decision to refinance. Depending on your situation, a break fee and a discharge fee may be payable to your original lender. You may then have to pay your new lender a valuation fee and application fee.

How will I know refinancing is the right thing to do?

Discussing your options with an expert broker at Lendstreet will help you know if refinancing is the right thing to do!

We receive our fee from the lender, so our services are completely free to you! We will find the most appropriate refinancing products on the market and search through plenty of lenders. We will then provide you with a great range of options to consider!

You can do some initial research to determine if refinancing is the right choice.

1. Read your home loan terms

Be aware of the current situation with your home loan. How much do you owe, and when will your home loan run out? What fees and costs are involved if you leave your original lender and refinance?

2. What deals are on offer?

Look around lender sites to see if the interest rate you are currently on can be beaten. Are lenders offering any incentives or refinance rebates?

3. Costs to switch

Different lenders will have different requirements regarding fees and costs. Take a look at typical lender fees to see if it is worth switching.

4. What is your break-even point?

If you refinance, it has to make sense in money terms. If your fees to switch total $2,000, you would have to recuperate that amount in repayment savings before experiencing a real benefit.

A reduced repayment amount of $100 per month would take 20 months to reach your break-even point. If your reduced repayment amount was $400 per month, it would only take five months to break even.

When can I apply for refinancing?

You can technically apply for refinancing whenever you want! On average, a borrower may look to switch home loans and refinance every 2 years.

For this reason, if you agree to a fixed-rate loan, a 2-year deal may be advisable. Refinancing when you are tied into a fixed deal may result in high break fees.

Other home loan borrowers may focus their refinance decision on external factors such as RBA rates. They may decide to fix a deal before rates rise or flip to a variable rate before rates decline.

You may decide to refinance depending on the different events in your life. If you are getting married or having a child, you may refinance to extend your home or make other improvements.

Alternatively, if you are going through a divorce or separation, you may extract equity from the property to pay a settlement.

How much will it cost me to refinance?

The costs involved in refinancing your home loan will depend on your circumstances and your lender’s requirements.

Possible costs include

1. Break or exit fees to release you from a fixed-rate home loan.
2. Discharge fee charged by the lender if switching.
3. Application fee for your new home loan application.
4. Valuation fee to value your property.

Additionally, if you are refinancing your home and there will be less than 20% equity left, Lenders’ Mortgage Insurance may be payable.

This will be an extra monthly instalment for you to consider as a regular outgoing expense. Lenders’ Mortgage Insurance does not reduce the amount you owe or contribute to interest. It is an insurance payment to safeguard the interests of the lender.

How can I apply for refinancing?

You can apply for refinancing through Lendstreet! We will take care of the entire process for you from start to finish. There is very little for you to do!

We will take your details and ask you your motives for refinancing. This is to find the best loan product for you!

We will search through a vast array of lenders and products and present you with the best choices. Your details will be processed, and the options available will be at your disposal.

If you decide to proceed, we will contact the lender on your behalf. The entire procedure is effortless!

What is a refinance calculator?

A refinance calculator can tell you exactly how much it would cost you to refinance. Visit Lendstreet’s Refinance Calculator today to discover the benefits refinancing may bring you!

Simply enter the details of your current home loan into the calculator. You will need to know how long is left on the home loan and the current interest rate.

The calculator will total the amount of money you would save if you switched to Lendstreet’s best rate! The calculation will tell you exactly how much you could save per year. It will also tell you how many years of the loan term you could save if you switched and refinanced.

Why should I use a mortgage broker service?

Lendstreet’s brokers are experts in loan products. They know what lenders will offer diverse borrowers and know what will work for you!

Your broker has direct contact with dozens of lenders! We can negotiate effectively with lenders on your behalf, accessing the best available opportunities.

We will look at the whole picture and your entire financial situation. Whatever debts you owe, and whatever your credit history is like, there is a lender for you!

Contact Lendstreet to refinance your home loan.

Lendstreet can help you when refinancing your home loan! We are leading brokers with an Australian Credit Licence, ready to find you the best new loan and refinancing options.

Contact Lendstreet today and see what we can do for you!

Get the latest news and updates from Lendstreet

Join and subscribe to our newsletter.

Subscribe Now

FAQs

Can a home loan refinance save me money?

Yes, if you are looking for competitive interest rates, refinancing can save you money!

Lendstreet’s Refinance Calculator will tell you exactly how much you could save compared to their best lender rate.

You will find out your monthly and yearly savings and how many years you could reduce your loan term by!

What if you are refinancing your home loan to release equity from your property? You may still save some money on mortgage repayments if you secure a better deal than your current lender deal.

Could you lose money when you refinance your home loan?

If you do not get the best advice, you could end up paying more money on your home loan when refinancing. This would only happen, however, if you switched to a deal that has higher rates than your current lender loan repayments.

To get the best advice and access to great deals, Lendstreet’s expert brokers can help you refinance your home loan!

Home loan refinancing does not need to be complicated! Contact Lendstreet today to refinance your home loan!

Should I switch to a fixed-rate home loan?

If interest rates are about to rise, fixing home loans is a sensible decision to make!

A fixed interest rate may result in higher mortgage repayments initially when compared to variable home loans. However, you will receive the security of knowing your repayments will stay the same, despite external influences.

Schedule a call to one of our expert mortgage broker

Ask our expert mortgage brokers anything about home loans.

Book A Consultation