Refinance Loan - Refinancing Your Home Loan

by Sam White, Loan Market Executive Chairman

Rising interest rates over the last few months of 2009 have lead to a marked increase in refinancing enquiries in the early parts of 2010.

And with interest rates rising yesterday and some predictions that the official cash rate will hit 5 per cent this year, more borrowers are likely to be taking a closer look at opportunities to save money on their current home loan/s over the coming months.

Are you satisfied with the performance of your lender? Are you happy with the interest rate you're paying? Are your repayments manageable? Are you using all of the home loan features you are paying for?

Refinancing your mortgage can be a good solution when you need to consolidate debt or lower your home loan repayments.

Be aware that there are costs involved in refinancing your mortgage, so if you are refinancing for what looks like a better home loan, the most important thing to consider is the long-term benefits against the actual costs of mortgage refinancing.

Speak to a mortgage broker to find out any exit or deferred establishment fees that you may be required to pay on your current loan and also any establishment fees on the new loan. A good mortgage broker will also help you find out if any lenders have special offers or packages which may benefit you.

If your mortgage refinance is to access equity, make sure that you have done your sums correctly on your needs and that there is enough equity available in your property to go ahead.

And finally, if you are refinancing your loan to a fixed home loan rate or an introductory rate, find out what the repayments will be once the introductory period is over and the interest rate reverts to the ongoing rate. Whilst a fixed rate may provide security around repayment amounts they are traditionally less flexible and you may end up paying much more than on a variable rate, even in a market where rates are rising.