Refinancing Your Home Loan: When Should You Consider It?
What Is Refinancing?
Refinancing means replacing your existing home loan with a new loan.
This could involve switching to another lender or changing to a different home loan product with your existing lender.
Borrowers may consider refinancing when their circumstances change or when they believe another loan could provide better value.
Why Do People Refinance?
There are several reasons a borrower may consider refinancing:
- Accessing a lower interest rate
- Reducing loan repayments
- Getting an offset account
- Changing from a fixed to variable loan
- Consolidating eligible debts
- Accessing equity in a property
However, refinancing is not automatically beneficial.
What Are the Costs?
Before refinancing, borrowers should consider any costs associated with leaving their existing loan and establishing a new one.
These may include:
- Break costs on a fixed-rate loan
- Discharge fees
- Application or establishment fees
- Valuation fees
- Government or registration charges
The potential savings from refinancing should be compared with the total costs involved.
How Do You Know If Refinancing Is Worth It?
Start by comparing your current loan with alternative options.
Look at the interest rate, comparison rate, fees and features rather than focusing on repayments alone.
A lower monthly repayment does not necessarily mean a lower overall cost if the new loan has a longer term or additional fees.
Review Your Home Loan Regularly
Your financial circumstances can change over time. Reviewing your home loan periodically can help you determine whether your current loan continues to meet your needs.
Comparing your options could help you identify opportunities to reduce costs or access features that better suit your circumstances.
You can use the Crest Finance home loan repayment calculator to compare potential repayments under different loan scenarios.
This article provides general information only and does not take into account your individual financial circumstances. Consider seeking professional financial advice before making a lending or property decision.
