When to consider refinancing my home loan

Refinancing your home loan can unlock a range of great benefits. From saving on interest repayments to accessing your equity and consolidating other high-interest loans, there are so many reasons why borrowers choose to refinance their home loans. But there are some instances when it makes more sense to refinance than others, so the trick is to try and pick the best time to refinance your loan. 

When can you refinance a home loan

Are you stuck wondering when to refinance your home loan? As it turns out, you can refinance your mortgage as little or as often as you like, so long as you meet the lending requirements of your chosen bank. 

With that said, it’s often a good idea to keep an eye on the market and review your mortgage annually to make sure you’ve got a loan that works best for you.

Here are eight common situations when you might want to consider refinancing your home loan.

Another lender is offering lower interest rates

One of the main reasons that borrowers choose to refinance is to access a lower interest rate. If interest rates have dropped since you first took out your mortgage, refinancing can help you secure a lower interest rate. When you refinance to a lower interest rate, you can potentially reduce your mortgage repayments which can also help you to save more over the life of the loan.

Your credit score has improved

One of the main factors lenders consider when assessing your refinancing application is your credit score. Ultimately, the higher your score, the more likely you are to make your repayments on time, meaning you pose less risk to the bank. 

Some lenders offer more favourable lending terms and even better interest rates to borrowers with high credit scores. So, if your credit score has improved since you first set up your mortgage, you might qualify for a better interest rate. 

Your financial situation has changed

If your financial situation has improved, such as receiving a salary increase, paying off other debts or boosting your savings, you could be in a better position to refinance and secure more favourable loan terms.

You’d like to switch loan types

There are stacks of different types of mortgages, but the ideal mortgage for you might not be available to you when you first take out a home loan. On another note, there might be changes to the economic market that could make it a good idea to refinance to switch up the type of loan you’re on.

For example, if it looks like interest rates are going to increase, it could be worth refinancing to a fixed-rate home loan to lock in a better interest rate. Fixed-rate mortgages can offer more stability and they can help you to save on interest payments in the event that interest rates rise for a period of time.

You’d like to tap into your equity

As you slowly chip away at your mortgage by making your regular repayments, you’ll increase the equity in your home. This can also happen if the value of your home appreciates in the time since you bought it.

As your equity grows, you can use these funds to cover the cost of renovating your home or even buying an investment property. But in order to access your home equity, you’ll generally have to refinance your home loan to take out a larger mortgage.

Your fixed-rate period is almost up

If you’re on a fixed-rate home loan, there will come a time when your fixed-rate period will end and your mortgage will roll over onto a variable interest rate. In the lead-up to your fixed-rate ending, it can be a good idea to review your mortgage and assess your options. You might find that there’s a lower interest rate out there that you’d like to switch to once your fixed-rate term ends. By refinancing your home loan, you can roll off your fixed rate and onto a more competitive interest rate with another lender.

Just make sure that you see out the end of your fixed-rate term or you could be up for a break fee when you refinance your home loan. 

You’d like to access additional loan features and facilities

When you first set up your home loan, you might not have been able to access the different features and facilities that come with certain types of loans. Features like redraw facilities and offset accounts can help you to save on interest repayments and they can even help you to pay off your home loan sooner if you use them to your advantage.

There’s incentive to switch

Some lenders offer incentives, like cashbacks, to encourage borrowers to switch to them. If you’re already considering refinancing your home loan, it could be worth keeping an eye out for potential cash back offers that could sweeten the deal for you. Just make sure that the loan product is also the right fit for you and aligns with your needs. There’s no point refinancing to score a cash back offer if the loan doesn’t work for you.  

Refinancing can offer a range of amazing benefits, but it’s important to make sure you make the switch at the right time. 

If you’re looking to refinance to a new kind of home loan that saves you more, check out Unloan. We’ve got rid of the frills and the fees so you can enjoy a more competitive interest rate and an annual discount. Learn more about refinancing to an Unloan home loan today.

‍

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, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

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.

*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.