• 27 Mar 2024
When Is It a Good Time to Refinance?

Our top 5 2024 tips for accessing if its time for an update to your home loan.

Refinancing a home loan can offer financial benefits, such as lower interest rates, improved loan terms, or access to additional funds. However, deciding when to refinance requires careful consideration of various factors.

1) The Interest Rate Environment
One key factor to consider when contemplating refinancing is the prevailing interest rate environment. If interest rates have significantly dropped since your initial loan, it may be a good time to refinance. By securing a lower interest rate, homeowners can potentially reduce their monthly repayments and save money over the life of the loan.

2) Better credit.
If your creditworthiness has improved since obtaining your original loan, you may qualify for better loan terms and interest rates. Factors such as an improved credit score, increased income, or reduced debt can positively impact your eligibility for more favourable refinancing options if you have gone with a non-banking lender.

3) Changing Financial Goals.
Changing financial goals can also prompt refinancing. For instance, if you wish to consolidate multiple debts, such as credit cards or personal loans, into a single mortgage with a lower interest rate, refinancing can provide a solution. Additionally, if you want to access the equity in your home for home improvements or investments, refinancing may be a viable option.

4) Flexibility and options.
Refinancing allows homeowners to reassess their loan features and seek more flexibility. If your current loan lacks desirable features, such as an offset account, redraw facility, or the ability to make extra repayments, refinancing can help you secure a loan that aligns with your preferences and financial needs.
It can also provide an opportunity to review the fees and charges associated with your current loan. Evaluate the costs of refinancing, such as application fees, valuation fees, and legal fees, against the potential savings or benefits gained from the new loan. It’s important to carefully compare the costs and benefits to ensure that the overall financial outcome is actually a positive one.
Keep an eye out for the cash back incentives that some banks offer, these can cover the costs of the refinance and sweeten the deal with some of the bonus left over. Your mortgage broker will be able to assist in comparing the best deals for you when it is time to refinance.

5) Loan structure.
If you currently have a fixed-rate loan and interest rates have fallen significantly, or have a variable-rate loan and interest rates have increased or predicted to rise, refinancing to a different structured loan could be advantageous. However, be aware of potential break fees associated with terminating a fixed-rate loan prematurely & the break fees alongside potential savings to determine if refinancing is economically beneficial in your situation.
You can quickly weigh the costs of breaking the fixed term by simply reaching out to the bank and asking them what the break cost of the fixed loan is. They should be able to give you an answer on the spot.

Seeking advice from mortgage professionals can provide valuable insights and guidance in determining the optimal time to refinance. At Specialist Mortgage our brokers can help assess your financial situation, analyse loan options, and recommend the most suitable refinancing strategy based on your individual circumstances and goals.

Deciding when to refinance requires careful evaluation of various factors. Monitoring the interest rate environment, assessing improved creditworthiness, changing financial goals, and reviewing loan features and fees & weighing the costs and benefits are crucial considerations, especially when purchasing Australian property or applying for an Australian home loan as a expat.

By understanding the appropriate circumstances and conducting thorough research, individuals can take advantage of refinancing opportunities to achieve their financial objectives and potentially save money over the long term.

Is it time for a refinance? Still unsure? Touch base today and we’ll do a deep dive into your situation and see if it’s worth it.