When Is A Good Time To Refinance My Home Loan?

As a homeowner, it can be tricky to know when the best time to refinance your mortgage is. Unfortunately, there’s no one-size-fits-all solution to refinancing. Instead, the best time to switch to a new loan depends on your financial goals and circumstances.

The benefits of refinancing

Refinancing your home loan can unlock a range of amazing benefits. From saving on your mortgage repayments and upgrading to a new and improved home loan to expanding your property investment portfolio, there’s a lot to be said for refinancing your loan. 

Here are just some of the reasons borrowers choose to refinance their home loans:

• Secure a better interest rate
• Reduce your bank fees
• Consolidate existing debt
• Tap into your home equity
• Access new features and facilities
• Adjust your loan term

But the trick to getting the most out of refinancing your home loan is to pick the ideal time to refinance. 

When to refinance

As a homeowner, there are likely to be some times that are better to refinance than others. Here are a few examples of instances when it could be a good time to refinance your home loan.

You’ve had your loan for at least 12 months

Setting up a new home loan doesn’t come cheap, so if you’ve had your current home loan for less than one year, it might make more sense to hang around until you’ve got your money’s worth.

On the flip side, if it’s been a little while since you reviewed your home loan it could be time to have a look at what else is available. Interest rates and home loan products are constantly changing, so there could be something better out there. With that said, make sure you consider the refinancing costs before making the switch. There’s no point spending cash to get out of your existing home loan and set up a new mortgage if it’s not going to benefit you.

Your financial situation has changed

Chances are your financial situation will change a number of times over the life of your loan, so it’s important to make sure your home loan suits your needs and where you’re at. Refinancing can be a great way to switch up your mortgage and set up something a little more fitting for you.

If your credit score has improved since you set up your mortgage, you might be able to refinance to a new loan with a better interest rate. If you recently got a pay rise and have a little extra cash to put towards your home loan, refinancing to a loan with a redraw facility could help you increase your repayments and pay off your mortgage sooner than you initially thought.

The official cash rate has changed

The official cash rate is constantly fluctuating and with it, the interest rates charged for home loans. There could be instances where another lender is offering a better interest rate than your current rate. Or, like we’ve seen recently, if interest rates start increasing, it could be a good idea to refinance to a fixed-rate mortgage to try and take advantage of a lower interest rate.

Ultimately, finding a more competitive interest rate means that you could pay less interest over the life of your loan and save on your mortgage repayments. 

Your introductory rate is wrapping up

Some lenders offer introductory rates or honeymoon rates to attract new borrowers. But just like an actual honeymoon, the good times don’t last forever. Once this period is up your loan will often roll over to the lender’s standard advertised rate. 

If your introductory rate is wrapping up soon, it could be worth doing a bit of research to see how other lenders stack up against your revert rate. If there are better interest rates out there, it could be worth jumping ship to a new lender if your current lender isn’t willing to negotiate on the interest rate.

Your financial goals have changed

With most home loans lasting anywhere from 25-30 years, chances are your financial goals will shift from time to time. Whether you’re keen to renovate your home, purchase an investment property or use your savings to offset your mortgage, it can be worth refinancing to a new loan that aligns with your financial goals.

You’ve built up at least 20% equity

When you purchase a property, most lenders require you to have a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI). The same goes when it comes time to refinance. Because LMI is non-transferrable, you’d need to pay it again if you were to refinance will less than 20% equity. So, if you’re still working towards that 20% equity benchmark, it could be worth continuing to chip away until you reach the magic number before refinancing. Unless you want to pay LMI again.  

There are better mortgage packages available

Lenders are constantly changing and updating their home loan products and packages, so if you’ve had the same mortgage for a while, there could be something better out there. From accessing new features and facilities to securing a better interest rate and saving on home loan fees, it never hurts to see what else is out there as far as home loans go.

If you’re thinking about refinancing, there are a few important factors to consider before you make the leap. Check out our blog to learn more about four factors to consider before refinancing. Otherwise, you can check out what’s on offer at Unloan. We’ve developed a new type of home loan that helps to save you more. Featuring a competitive interest rate, annual discount and no fees, our home loan is simple but works hard for you. Check out your eligibility or sign up today with our simple six-step application process.  

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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.