Refinance your mortgage

How refinancing your home loan can help you save

On 2 August, the Reserve Bank of Australia cut interest rates by 25 basis points to 1.5%, the lowest they’ve ever been. The unexpected move presents an opportunity for homeowners to save money on their home loans through refinancing. When the Reserve Bank cuts the cash rate, mortgage lenders usually pass on at least some of that cut to their home loan borrowers, and in this instance, all four Australian big banks cut their variable loan rates.

Generally speaking, homeowners refinance their mortgage for a variety of reasons, including taking equity out of the home to pay for renovations, education, or other debt; switching mortgage providers; changing the terms of their mortgage, such as switching from a fixed to a variable rate; shortening the term of the loan; or reducing monthly payments,. And of course, the lower the interest rate of your loan, the less money you’ll pay to your lender in total.

Before you make the call to refinance, though, keep in mind that there are often penalties to pay for breaking your current mortgage term, even for the purpose of refinancing. Some lenders allow you to roll that cost into your new mortgage, however, and depending on the interest rate difference, you can still be paying less in interest over the term of your loan, in addition to having lower monthly payments. Using a home loan repayment calculator will allow you to see what the difference will be in your monthly payments as well as the difference you’ll end up paying in interest over the life of your loan.

If you’re not planning on living in your home much longer, though, it might not make much sense to refinance your home. You’ll still have to pay fees when you refinance, so going through the process may only make sense if you’re planning on staying in the home long enough that the short-term savings eclipse the cost of those fees. Again, using the Beyond Bank home repayment calculator will help you figure out how long you’ll have to stay in order for a refinance to make sense.

Don’t forget to look at the smaller lenders as well as the big banks. When it comes to refinancing, everything is on the table. Rates are important, but they’re not the only thing to keep in mind. Terms and conditions can make a big difference over the life of your mortgage – or at least over the life of the particular term.

Financial situations aren’t stagnant, so before beginning the refinancing process, be sure that you could withstand a little bit of wiggle room, whether that’s in case of income loss or a sudden windfall – it’s important that your home mortgage be flexible enough to deal with either scenario. It’s not uncommon for homeowners to refinance every few years in order to better the terms of their home loan if lower interest rates are available. It’s certainly worth using a home repayment calculator every so often with your most recent numbers, and see if refinancing is the way to go.
This article was written by, a source for mortgage calculators, load help, and brokerage advice.

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