Knowing when to refinance your home loan
Refinancing your home loan could save you money that would otherwise be spent on interest. Making the right move at the right time could maximise your savings, but how do you know when to refinance? Keep reading to learn the basics and find out how to make a smart decision about the future of your home loan.
Is it time to refinance your home loan?
Refinancing your home loan could be easier than you think. By refinancing your home loan, you could potentially take years off your home loan term and possibly save thousands of dollars in the process. However, you need to get your timing right; refinancing your home loan at the wrong time may end up driving up your costs.
Refinance with a good credit rating
If you have a good credit rating, it might be a good time to think about refinancing your home loan. Most loan applications involve a thorough credit report check by your potential lender, and home loan refinancing is no exception.
What is a credit report?
Basically, it’s your credit history. This includes information about your existing credit and types of credit, if you have made credit card repayments on time, how many applications you have made, and if you have been involved in serious infringements.
A good credit score boosts your chances of landing a loan. On the other hand, if you’ve got a fair bit of debt hanging around you may want to pay that down before you refinance your home loan, as you could stand a better chance of succeeding in your application then.
Consider a lower rate, but compare the exit fees
Many homeowners tend to be attracted to lower interest rates for obvious reasons – it makes sense to switch over to lower interest rates that could save dollars. However, you need to do the math to see if the switch is worth the cost.
This includes exit fees, depending on your lender and where you’re up to with your loan repayments. Hint, your broker can help you calculate if refinancing is worth the cost.
Review your home loan regularly
Remember that the world of interest rates is constantly changing, and you need to keep reviewing your home loan on a regular basis - we recommend checking in about once a year. It doesn’t take much for interest rates to change, since developments at one end of the world could have an impact on the other end in a matter of months, if not days.
However, that’s not to say that you need to keep refinancing your home loan every couple of years – you should be mindful of the costs involved in switching loans, and refinancing all the time could cost you much more than what you could gain. Watch out for the right opportunity and stay in touch with your broker.
Is now a good time for you to refinance your home loan but you’re not sure why you should? Follow our complete guide refinancing to find out why you should refinance and some of the benefits that may come from making the change.
Disclaimer: This document has been created by Loan Market Pty Ltd (ABN 89 105 230 019, Australian Credit Licence number 390222). Any refinancing is subject to lender imposed terms and conditions including but not limited to loan serviceability, valuations and confirmed capacity to service both any existing and revised lending arrangements. The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances.