When should you consider refinancing your home loan?

By Nina Cuturic

After securing a competitive home loan product, borrowers can finally breathe a sigh of relief and start to become familiar with the monthly repayment amount.

However, checking in on whether your home loan continues to work in your favour, well after signing into it, could save you thousands in the long run.

The real estate market is far from stagnant, and this rings true to home loan products and the lending climate, which experiences fluctuations and sees lenders issuing new home loan products and adjustments to the interest rates.

But while signing into a mortgage just when the rate takes a dip has borrowers holding the pen with a lighter grip, those who are already loyal to a mortgage can still take a slice of the offerings.

In a new Yourmortgage.com.au video interview, Nancy Youssef, founder of Classic Finance, offers expert guidance on when borrowers should consider refinancing their home loan, and the benefits of doing so.

“Typically, we see people looking to refinance mainly to get cheaper interest rates, which will in turn lower their repayments,” Youssef shares with Yourmortgage.com.au managing editor Sarah Megginson.

“Another common reason we see people refinancing is that their property values have gone up so they look at tapping into some of the equity and we call that cash out and that money that they tap into can be used towards other investment purchases or other personal reasons that they need the equity.”

Also read: Thinking to refinance? This is why you need a mortgage broker

Consolidating debts is also on offer through refinancing, as Youssef shares, which is when multiple personal debts are pooled into one so that a borrower can better manage their finances and potentially tend to them over a shorter-period of time; in turn, cutting back the amount of interest that’s paid over the life of the loans.

However, just like signing into a home loan requires deep research and getting the right professionals on-board, refinancing needs to be carefully thought through also – weighing up the cash savings on offer against your current home loan product, and also being aware of the fees that come in conjunction with a refinance.

“Refinancing is generally not a good idea if there’s no apparent savings. Sometimes people get swayed by the interest rate thinking, ‘oh, I might save 0.25%’, but you’ve also got to look at all the costs involved in refinancing,” Youssef says.

“Another thing that you need to be careful of is if you are currently in a fixed-rate loan and you look at moving; there could be some hefty break costs so it’s always very good to check with your lender before refinancing to make sure that there are no other costs or hidden things you weren’t budgeting for.”

To find out more about how you can best approach a refinance – including the value of a mortgage broker, how loan term and offset accounts come into play, as well as how to build equity ­– watch Nancy Youssef’s full interview.

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