4 Scenarios Of When It's A Good Idea To Refinance

As a homeowner, there’ll be times when refinancing your home loan just makes sense. With that said, it can often be tricky to know when the best time to refinance is. Here are scenarios to consider when assessing whether to refinance.

  1. Your fixed-rate period is about to end

    When you sign up for a fixed-rate loan, you’ll typically sign up for 1-4 years. Once that time is up, your home loan will roll over to a variable interest rate. As you approach the end of your fixed-rate term, it’s often worth looking at the options available to you. You might choose to stay with your current lender, sign onto a new fixed-term loan or refinance to a different lender. In most cases, you’d go for the option that suits or supports your financial goals.
  2. You’d like to access the equity in your property

    Whether you’re keen to buy an investment property, you’d like to renovate your home or you need to free up some cash for an upcoming expense, refinancing your home loan could allow you to tap into your home equity to fund larger purchases or expenses.

    It’s worth noting that just because you’ve managed to build up a certain amount of equity in your home doesn’t mean that you’ll be able to access all of this money. To work out how much equity you might be able to access, also known as usable equity, just calculate 80% of your property’s current value and subtract the amount you still owe on your mortgage.
  1. You’d like to adjust your home loan term

    In some cases, you might want to consider refinancing to adjust the term of your home loan. Please note that this is subject to a serviceability assessment to determine your affordability.

    If your income has increased and you can afford to service higher mortgage repayments, refinancing to a shorter loan term could help you save on interest repayments over the life of your loan. Before you up the ante on your loan repayments, it’s important to be realistic about what you can afford. While you might be able to budget for higher repayments now, will you still be able to afford it if interest rates increase or your income drops

    On the other hand, if you’d like to reduce your mortgage repayments, you might want to consider switching to a longer loan term. Just remember that a longer loan term means you’ll be making more interest payments, so it’ll end up costing more over the long run.
  1. You’d like to consolidate your debts

    If you’re juggling multiple different debts, it could be worth refinancing your home loan to bundle all your debts together. Please note that this is subject to a serviceability assessment to determine your affordability.

    Known as debt consolidation, refinancing could help you manage multiple debts and even secure a lower interest rate across the board. From credit card debts to personal loans, debt consolidation could help you to pay down your debt quicker.

    But before you go refinancing to consolidate your existing debts, it’s important to make sure that you do your research to make sure you’re better off with a single loan. And don’t forget to close those accounts and cut up any credit cards to make sure you don’t end up making the same mistakes again.

For a home loan that saves you more, check out Unloan’s competitive variable rates. You can even use our savings calculator to work out how much you could save by switching to Unloan. 

This article does not have regard for the financial situation or needs of any reader and must not be relied upon as financial product advice. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this, consider the appropriateness to your circumstances.

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

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