How often you can refinance your home loan

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.

• Related: How to negotiate a lower interest rate on your home 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.

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.

• Related: How much does it cost to refinance?

How soon should I refinance my home loan?

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.

• Related: guide to equity home loans

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.

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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.