5 things you need to consider before refinancing your home loan

Recently, I’ve had a number of friends and clients ask me, ‘is now a good time to refinance my home loan?’. The truth is… it depends.

In general, home loan refinancing can be a great way to battle rising interest rates and secure your mortgage position. But whether or not you should refinance your home loan now, depends on a variety of personal and financial factors.

Here are the five things everyone should consider before deciding if refinancing your home loan is right for you.

Lower Interest Rates

Interest rates are currently increasing faster than ever. If you have a current mortgage with an interest rate that has risen in line with the RBA’s increases, it’s likely you have the opportunity to decrease your interest rate.

Get Better Loan Terms

Refinancing your home loan could allow you to change the loan terms. These new home loan terms may better suit your current financial situation.

The Ability to Access Equity

If you have built up equity in your home, refinancing could allow you to access that equity through a cash-out refinance.

This opens up opportunities to turn some of your ‘dream’ goals into achieved ‘goals’; be it renovating your home, buying an investment property or starting a share portfolio.

Added Lender Features

If you’re unhappy with your current lender features, refinancing could allow you to open up options such as offset accounts, fixed rates or other benefits such as cash backs.

Avoid the Mortgage Trap

In an ever-increasing interest rate market, your ability to refinance and achieve the above outcomes could be limited. This is due to the relationship between how much you can borrow and your interest rate.

As interest rates rise, this reduces the amount you can borrow. If your borrowing capacity is too low, you may be unable to refinance and trapped with your current lender.

Don’t forget, refinancing can also come with costs, such as closing costs and fees. It’s important to carefully consider whether the potential benefits of refinancing outweigh these costs.

After factoring in all the above, you will be in a better position to answer the earlier questions, ‘is now is a good time to refinance my home loan?’.

Your next step is to speak to your mortgage broker. They can not only help you renegotiate with your current lender, but also provided options for other lenders than may be more suited to your personal and financial situation.

If you are after a Lending Specialist who will help you own your property as opposed to merely selling you a mortgage, visit our Lending Solutions & Mortgage Broking page for more information.