Why refinance? The latest RBA cash rate hike (started on May 2022) has got a lot of homeowners worried about the rising costs of mortgages. Many are rushing to get their home loan health checked and shop for more competitive rates in the market — smart moves during these tough times!

If you:

  • are unhappy with your current home loan rate and feel like you can get a better one; or 
  • find yourself at the end of your fixed rate mortgage term and is nearing the edge of what is popularly known as the mortgage cliff

this blog is for you. We’ll explore the top six reasons why you might need to refinance your home loan and when a good time is to do so.

What do you need to refinance your home loan?

To refinance home loan, you’ll need to have enough equity in your home, a good credit score, proof of income, a property valuation, and documentation such as your existing home loan statement and identification documents.

It would be helpful do your own research and compare different lenders and loan products to find the best option for your needs. Make sure to carefully review the terms and conditions of any potential new loan before making a decision.

Why refinance? Here are 6 reasons why

1. Home refinance loan rates are better than the current rate you’re on

Refinancing can be an excellent opportunity to lock in a lower interest rate, which can result in significant savings over the life of your loan. Interest rates constantly changing — and at a rate we haven’t witnessed in the last 10 years! 

2. Change the terms of your loan

Some people refinance their home loans to extend their terms. By doing so, you can lower your monthly repayments, which can free up cash for other expenses or investments; however, you’ll end up paying more in interest charges over the life of the loan.

Others refinance to a shorter loan term and make higher repayments in the process. This is a good option for those who want and can afford to be debt-free sooner.

3. Lock in a new fixed rate

Refinancing to a fixed-rate loan can provide stability and certainty around your repayments. This is especially helpful for those who like to budget and plan ahead. Those who locked in fixed rates back when we had historically low interest rates were truly ahead of the curve!

4. Debt consolidation

Refinancing can be an opportunity to consolidate high-interest debts such as credit cards or personal loans into your home loan. It’s also a great way to reduce the stress of paying multiple bills with separate interest charges as they will be rolled into a single payment and interest rate!

5. Refinancing home loan for renovations

If you’re thinking of selling your home or renovating it to accommodate life changes such as getting married or having children, then you can totally refinance to renovate your home! You can tap into your home equity to obtain financing for your renovation faster.

6. Avail home loan refinance cash back deals

Some lenders offer cashback deals to incentivise borrowers to refinance with them. These deals can provide a lump sum of cash that you can use towards paying off debt, making home improvements, or investing in other areas. 

Just be cautious around cashback deals that may seem attractive at first but could potentially cost you more over the life of your loan. 

When to refinance your home loan

Refinancing your home loan can help you save money, reduce your repayments or access equity. But when is the best time to do it? 

Interest rates have been rising steadily, with the Reserve Bank of Australia (RBA) increasing the cash rate 10 times to 3.60% (at the time of this writing). This has put a lot of homeowners under mortgage stress, having to deal with higher mortgage costs on top of higher living expenses. 

Below are good time indicators on when to consider a home loan refinance:

  • You have enough equity in your home
  • The initial refinance mortgage cost does not offset the overall, long-term financial gains of refinancing your home loan.
  • You are nearing the end of your fixed rate mortgage
  • Your are paying loyalty tax (ask a refinance mortgage broker!)

However, refinancing also comes with costs and risks, so you need to weigh up the pros and cons carefully. You should also keep an eye on the economic outlook and the RBA’s future decisions as they may affect your refinancing options and outcomes.

Do I need a mortgage broker to refinance?

While you can always call your lender to ask for a better deal, or switch to a different lender on your own, a refinance mortgage broker will just make the process a whole lot easier and faster for you. 

Not only will they take the stress out of comparing different loan options, negotiating better rates and fees, and handling the paperwork for you; they will also advise you on things like how to improve your borrowing capacity or access your equity! They could also help switch lenders for great deals — why refinance with your current lender who’s more inclined to give better rates to new customers?

Call us at Stryve Finance to know if refinancing your home loan is right for you. We’ll do the heavy lifting for you by negotiating with different lenders from our panel of over 30 banks. Sit back, relax, and let us take care of the nitty-gritty so you can focus on what really matters.