There is no set time frame dictating when you can refinance your home loan again after refinancing. Whether you’re an investor or owner-occupier, over the lifetime of your home loan, you’ll probably end up refinancing several times. In fact, it’s smart to consider refinancing roughly every 2 years but it’s different for everyone.
However, there are a few guidelines you should be aware of before you refinance your mortgage again. In this article we’ll go through when refinancing makes sense, when it doesn’t and how to go about it.
Don't pay more than you need to.
Refinancing your home loan can be beneficial for a number of reasons. Here are some reasons why borrowers refinance their home loans:
Interest rates fluctuate regularly, as they are dictated by the Reserve Bank of Australia’s (RBA) cash rate. If you have a variable interest rate, your lender theoretically should reduce your interest rate when the cash rate drops (and vice versa).
Your interest rate will have a significant effect on the overall cost of your home loan. Even a slightly lower rate can make all the difference and save you thousands of dollars and reduce your monthly payment. If your lender isn’t providing you with a competitive rate, you might consider refinancing.
First, it’s a good idea to contact your lender and try negotiating a lower interest rate. If you’d prefer, Lendi’s Home Loan Specialists can negotiate on your behalf.
If you have multiple forms of unsecured debt (i.e. credit cards, personal loans and car loans), you may have the option to consolidate these debts with your home loan. What this means is that your unsecured debt will be bundled together into your mortgage.
You can allocate a timeframe to repay specific debts within your mortgage to avoid paying more in interest. The appeal is that these debts benefit from the lower mortgage interest rate.
Roll your credit card, car or personal loans into your home loan.
Maybe you’re earning more money and you’d like to pay off your mortgage faster. You could refinance to increase your repayments, or just switch to a variable rate loan or a flexible fixed rate loan that allows you to make extra repayments. The faster you pay off your mortgage, the less you’ll spend on interest.
It’s important to find a lender that communicates well and is trustworthy. Some lenders are better at providing updates and assistance than others. Another thing to consider is how easy it is for you to make repayments and service your loan. It could be beneficial to move to a more technologically advanced lender if you feel that your current lender is lacking in this department.
While it’s easy to dedicate your focus to securing and maintaining a competitive interest rate, try to look at the whole picture. Your loan is much more than just an interest rate.
If you are more of a saver now, you could add an offset account to reduce your interest payable. Alternatively, if you plan on making extra repayments, a redraw facility can pool your additional repayments into an accessible fund that also offsets interest.
Don’t forget to evaluate your home loan fees and work out if there’s somewhere you could be saving as many lenders offer zero fee home loans. If you’re interested, get in touch with a Home Loan Specialist for more information.
Many of the above reasons are great incentives to refinance your mortgage. At the end of the day, however, you need to do the maths and work out if refinancing will put you in a better financial position afterwards.
As a guide, think about refinancing when your interest rate is no longer competitive and your home loan no longer suits your lifestyle. When you undergo major changes in your personal life, this could also be an opportunity for refinancing. For example:
These kinds of events have the potential to impact your ability to make repayments. When you are unsure of how to proceed in these circumstances, speak to a financial adviser for case-specific advice on your situation.
Outside of these situations, try to closely evaluate your home loan at least every 2 years. You can also regularly monitor interest rates and see how your interest rate and home loan compares to others on the market.
Remember that your loan term is likely between 20 and 30 years, so don’t sit on a home loan that you aren’t satisfied with. If you aren’t satisfied with your home loan, then it’s probably time to refinance.
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In general, yes you can refinance your home loan after 6 months. However, refinancing comes with fees so you need to weigh up the costs associated and see if it's worthwhile. Notably, it may not be a good idea to refinance a fixed rate home loan this soon as you will almost definitely incur break fees.
It's pretty uncommon for borrowers to refinance after just 6 months, but sometimes it's the best thing to do. Here are some reasons why you might consider refinancing quickly:
The time it takes to refinance can vary between individuals and lenders. If you're lucky, you may be able to refinance in as little as a week but it can take much longer.
If speed is a priority for you, we recommend speaking to a mortgage broker or Home Loan Specialist. They'll have more insight into which lenders tend to process loan applications quickly and which ones might be slower.
It's also a good idea to use an online mortgage platform to compare and apply for home loans all in one place. This can be faster than going up to your local bank branch for a refinance.
Here are some documents to have ready to speed up the refinancing process:
Unfortunately, the speed at which your home loan application is processed is not something you can control. Even the most perfect applications can be delayed if a lender decides it wants to see more details of your expenses, for example.
Try to give yourself plenty of time to refinance to avoid stress and the risk of accidentally making errors.
You can refinance a home loan with a fixed interest rate, but you may face penalty fees. Unlike a variable rate home loan which offers the flexibility to make extra repayments and refinance penalty-free (for the most part), a fixed rate mortgage offers stability and security.
When you get a fixed interest rate, you agree to that interest rate for a period of time between 1 and 5 years. It’s possible to ‘break’ this fixed rate term by making additional repayments above the permitted cap or by refinancing.
To make up for the financial loss they will incur by you refinancing your fixed rate, your lender will likely charge break costs. Before you refinance, ask your lender to find out what break costs you could be charged. Then, work out whether refinancing at this time is worth it.
Sometimes, it may make more sense to wait until your fixed period ends before switching to a new loan.
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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.
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