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How often you can refinance your home loan

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Most homeowners will have thought about refinancing at some point. It can be a great way to save money and adjust to changes in your personal and financial circumstances. It’s important to regularly consider refinancing, but just how often can and should you refinance your home loan? In this article we’ll explain what you need to know about refinancing, including when and why you should do it.

Why should I refinance my home loan?

There are a range of reasons why a homeowner might consider refinancing. One of the most common reasons to refinance is to save money — usually by adopting a lower interest rate. With interest rates being at a historical low right now, it’s highly likely that the interest rate you got just a couple of years ago could no longer be competitive. Even a marginally lower interest rate can make a big difference in the overall amount you’ll pay towards your loan.

If you experience a change in your income, refinancing might make sense. For example, if you receive a pay rise, you could choose to increase your minimum loan repayment amount which could help you pay off your loan faster and save interest.

On the other hand, you might consider refinancing to lower repayment amounts if you experience a drop in income. This will likely extend your loan term, but it can relieve the financial burden and stress. Don’t forget that you can refinance again if your income goes back up.

Other reasons to refinance may include:

  • Accessing your equity
  • Debt consolidation
  • To add loan features (e.g. offset account or redraw facility)
  • To switch between a variable and fixed interest rate.

How do I find out if my interest rate is still competitive?

Lendi recommends that homeowners do some research every 6 to 12 months to see how their interest rate and home loan compares to the market. This can be easily done online, using Lendi’s home loan comparison tools.

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It’s also smart to see what interest rates your existing lender is offering to new customers. Chances are the rates will be lower than your current rate.

I think my interest rate is too high — what now?

So, you’ve compared your home loan interest rate and found better rates. If your current lender is offering better rates to new customers, don’t be afraid to directly ask them for the new rate. Our Home Loan Specialists are happy to negotiate on your behalf, if you’d prefer.

If you’ve seen better rates elsewhere, Lendi can help you refinance through our online platform. We do all the hard work for you so that all you need to do is provide us with the relevant paperwork. Any questions you have along the way can be answered by our expert Home Loan Specialists. Get in touch with us today to start your refinancing journey.

Don’t forget that home loans are more than just their interest rates. Many home loans have fees attached to them (e.g. establishment and annual fees) that can outweigh the low interest rate. There are also a number of costs associated with refinancing, so it’s important to calculate those and see if refinancing will still benefit you in the long term.

How soon should I refinance my home loan?

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There aren’t strict rules about when to refinance, but there are some guidelines. Typically, you’ll want to have at least 20% equity in your home before you refinance to avoid paying Lenders Mortgage Insurance (LMI). Remember that equity is calculated by working out the difference between your loan balance and your property’s current value. It’s likely that your home’s value has changed since you purchased it, so lenders will require a property valuation to be conducted before refinancing.

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Take into account the costs involved in refinancing. Refinancing could cost more than any interest savings involved. It’s best to consult with experts who can advise you on whether refinancing is the right move for you. Book an appointment with a Home Loan Specialist here for free expert advice.

Everyone has different circumstances. Sometimes it can make sense to refinance after 6 months. Other borrowers might refinance after 10 years. Generally speaking, it’s a good idea to look into refinancing every couple of years, but you can research and compare interest rates more frequently.

Switching between a variable and fixed interest rate

During this volatile time, many homeowners are seeking out the security offered in fixed rate home loans. Should there be a significant change in interest rates in the coming months, those with fixed rate loans won’t be subject to these changes during the course of their fixed period.

Homeowners who prefer flexibility in their home loan might be better suited to a variable rate loan. You can still refinance when your home loan has a fixed interest rate, but there are some things you should think about. Fixed rate home loans are only fixed for a short period of time — usually between 1 and 5 years. If you want to refinance during the fixed period, you may be hit with break costs.

Break costs are fees charged by lenders when borrowers ‘break’ their home loan — usually by refinancing before the fixed period is over. Lenders charge break costs to cover the financial loss associated with breaking a fixed rate.

Before you refinance, contact your lender to find out what you can expect to pay in break fees. Some lenders may not charge you for breaking your loan if you refinance with your existing lender.

Got a home loan question? Just ask!

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: refinance, interest rate, home loan, debt consolidation, break cost, variable interest, fixed interest, equity

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. Lendi's board is majority independent and non-executive.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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