How Often Can You Refinance A Home Loan?

As a borrower, it can be tempting to regularly refinance your home loan to make sure you’re getting the most competitive rate on the market. Even though you might be saving yourself in terms of interest, could you actually be doing more harm than good?

Just because you can refinance your loan doesn’t always mean it’s the best move for you. Read on to learn more about how often you should be refinancing your home loan.

What does refinancing mean?

Refinancing is the process of taking out a new home loan to replace your current mortgage. Most borrowers will usually refinance their home loan to attract a lower interest rate, tap into their home equity, reduce their bank fees, change the loan term, consolidate debt or access new loan features and facilities. 

How frequently can you refinance your loan?

There aren’t any hard and fast rules around how often you can refinance your home loan. Essentially, you just need to meet the bank’s lending criteria to be approved for a refinanced home loan.

With that said, there are a few key considerations worth thinking about before you decide to refinance your loan. While swapping to a lower interest rate might seem like reason enough to make the switch, is it actually worth it? 

Here are a few points worth thinking about before refinancing your mortgage.

Refinancing costs

Refinancing your home loan doesn’t come cheap, so it’s worth making sure that the potential savings that come with a new mortgage are going to outweigh the cost of refinancing your loan. 

You’ll often have to pay a discharge fee to exit your current home loan. If you’re on a fixed-rate home loan, you might also be up for a break fee if you choose to leave your loan before the end of the fixed-rate period. But the fees don’t end there, you’ll often have to pay to set up a new home loan too.

When you switch to a new lender you’ll generally have to foot the bill for establishment fees, property valuation fees, settlement fees and service charges to name a few. At the end of the day, refinancing your home loan could set you back anywhere from a few hundred dollars to a couple of grand. Every lender is different, so be sure to check in with them to see what you’ll be up for. 

Home equity

Depending on how much equity you’ve built up in your home, you might also have to cough up for lender’s mortgage insurance (LMI) if you choose to refinance your home loan. Most lenders like to see that you own at least 20% equity in your property. If you have less than 20%, it’s not necessarily a deal breaker when it comes time to refinance, it just means that you’ll have to pay LMI to cover the extra risk to your new lender. If you already paid LMI when you first set up your current home loan, do you really want to foot the bill for it a second time around?

If you have managed to build up more than 20% equity in your property, you’re often considered a lower-risk borrower which comes with its own set of advantages. For instance, you might be able to access more favourable interest rates or loan terms depending on how much equity you have. 

Lender’s policies

Some lenders enforce a wait period before borrowers can refinance their home loans. With this in mind, it pays to familiarise yourself with your lender’s policies, especially if you’re considering refinancing soon after establishing your home loan.

Financial circumstances

If your financial situation has changed recently or is likely to change shortly, refinancing might not be the best option for you. From starting a family to changing jobs or taking on another loan, these factors can affect your borrowing capacity and your ability to gain home loan approval.

Credit score

When you apply to refinance your home loan, your new bank or lender will usually complete a credit check to make sure you meet their lending requirements. This is known as a hard inquiry, which can temporarily lower your score for a short period. If you regularly refinance your home loan or submit several refinancing applications across multiple lenders, these types of credit checks could have a lasting effect on your credit score making it harder to get approved for a refinance application. 

Financial goals

Before refinancing your home loan it can be worth reviewing your financial goals to make sure refinancing aligns with your objectives. For example, if you’re planning on selling your home in the near future, refinancing to secure a lower interest rate might not be worth it. 

Even though you can technically refinance your mortgage as often as you like, it doesn’t mean that you should be constantly chasing a lower interest rate. In fact, trying to save yourself a few bucks could end up costing you more. With this in mind, it’s important to make sure that the benefits of refinancing outweigh the potential costs for your wallet and your credit score. If you’re stuck trying to make a decision, you might even want to talk with a financial advisor or mortgage broker for tailored advice based on your circumstances and the current market conditions. 

If you’re looking for a brand-spanking new home loan with a competitive interest rate, check out what’s on offer at Unloan. Plus, with zero fees* and an annual discount to boot, you could just snag yourself a new loan that’s been designed to work harder for you. Explore Unloan’s great loan features or check your eligibility today.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

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.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.