Now May be a Good Time to Refinance Your Mortgage 

Refinancing could be a solution for Australian homeowners looking to save money in 2024. Data from the Australian Bureau of Statistics (ABS) shows that as of August 2023, a massive $407M for owner-occupied home loans and $136M investment property worth of home loans were refinanced from one lender to another. But before you go ahead, it’s important to check that the benefits of refinancing outweigh the costs. Here are some important factors to consider to help you make an informed decision about refinancing your home loan. 

Your existing home loan 

Before refinancing your home loan, ensure you have a clear understanding of how your current home loan is set up and what features are included. Ask your lender for a key fact sheet that sets out the pricing and other important information about your home loan in an easy-to-read format.   

This document will include details of interest rates, the total cost of your home loan, monthly and annual repayments, and an explanation of how a change in interest rates could impact repayments. Use the key facts sheet to compare home loan products and features across various lenders, and to see how your home loan stacks up against what’s available in the market. 

The refinancing process 

When comparing home loans and considering refinancing, remember that interest rates are just one of the many variables to think about. You’ll also want to compare: 

• Monthly repayments 
• Fees charged by the existing lender and the new lender 
• Loan term 
• Loan features include redraw facilities, offset account, or a line of credit 

Refinancing a loan from your existing lender to a new lender means you could be faced with extra fees. As well as an establishment fee charged for setting up a new loan, and the ongoing fees charged each month for administering the loan, your existing lender may charge early termination fees if you end your loan term early.   

So, before you go ahead and refinance, weigh up the cost of these fees against any potential savings in interest rates to ensure refinancing is the right option from a cost point of view. You should also discuss your thoughts with your mortgage broker to be sure you have compared the options appropriately and to see if there are other options for you.   

Reasons to refinance 

There are many good reasons why borrowers choose to refinance a home loan. 

Here are some of the pros and cons of refinancing a home loan: 

Pros: 

• Switching to a lower interest rate reduces your monthly repayments and could help you pay off your home loan much faster. 
• Accessing the equity in your home frees up cash to use to renovate, re-invest, buy a new car, consolidate some debts, or pay for any unexpected expenses. 
• Increasing your loan term may reduce your repayments while decreasing your loan term means you’ll pay less interest over the life of your loan. 

Cons: 

• Consider all the fees like exit fees, valuation fees, application fees, and break fees charged by lenders.
• If your resulting equity is less than 20% of the property value, you may be required to pay Lenders Mortgage Insurance (LMI) when you refinance. 
• Refinancing your home loan often could impact your credit score, possibly making it harder to get lower interest rates on future applications. 

Finally, get advice from your mortgage broker before refinancing your home loan or switching lenders, as your mortgage broker can help you determine if refinancing is right for you, help streamline your application, and ensure you understand what’s required of you at each step of the refinancing process. 

Contact a Mortgage Broker today to find out more about refinancing your mortgage.