When is the best time to refinance?

As mortgage brokers, we see this question popping up quite often. And there's good reason too, as refinancing your home loan can have a significant impact on your budget – not to mention your lifestyle.

For one, refinancing to a lower rate can free-up some cash in your budget, allowing you to spend it on other things or save it.

This can help make you feel more confident about your financial situation.

You can also become more comfortable with your debt and pay it off with ease after you consolidate it through refinancing.

It's hard to provide the best time to refinance, as this really depends on a number of factors, both economic and personal.

The official cash rate can change almost as fast as the seasons, while your personal situation may fluctuate just as often.

This means that the best time to refinance your home loan is ultimately when you think it's a good time to do so.

Here are a couple of factors that you may want to keep in mind.

Cash rate decision

One of the many reasons why people choose to refinance their home loan is to secure a better deal.

This is really good to do once interest rates are low, as many borrowers can save some money on their home loan repayments.

Each month, the board at the Reserve Bank of Australia meets to decide the fate of the official cash rate. There are three outcomes that can occur: a rise, a reduction, or a hold.

A reduction in the official cash rate can lead to lower interest rates, so it's a good idea to consider refinancing at this point.

Loan features

Another reason why people refinance their home loans is to add or remove loan features. From additional redraw to facilities, line of credit, additional repayments and repayment holidays, loans come with all types of features for borrowers.

The trick is knowing which ones you'll use and which ones you won't. From there, you can refinance to a loan that is more suited to your financial situation and lifestyle. 

For example, if you're paying for the use of an offset account with your home loan but you're not using it then contacting a mortgage broker to discuss will give you the best insights as to how to move forward.

You may be able to remove it from your loan and save money in the long run.

On the other hand, you may find that you want to make additional repayments to your loan. This could lead you to switching from a fixed rate home loan to something more suitable where you can make more additional repayments.

Change of circumstance

If you've experienced a significant change in your personal circumstances then you may want to think about refinancing your home loan.

You may have had a new baby, secured yourself a higher-paying job, or settled into retirement.

Whatever has happened, take some time to speak to a mortgage broker to see how it may affect your home loan.

You might even find yourself paying your mortgage off quicker after refinancing, especially if you've increased your regular repayments.

If you've been wondering when the best time to refinance your loan is, make sure you discuss your options with a mortgage broker first.

Refinancing has its costs, so it's best to weigh up your options with an expert before you make a decision.

That way, you can be sure that you'll be comfortable with your home loan for the future.

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