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Refinancing your home loan means changing your existing loan for a new one and usually, with a new bank.

These days, banks do not reward loyalty, and in most cases we find lenders offer better deals to new customers rather than rewarding their existing ones.

For borrowers who might feel like their current mortgage has already lost its competitive edge, refinancing is the way to go. You can also think of refinancing as another opportunity to reassess your financial standing and get a home loan that best fits your needs. It is eventually going to come down to your personal situation, and your own short to medium term goals. So it may be worth checking whether refinancing is the right path for you.

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Here are a few reasons why you might consider refinancing your home loan.

1) Reduce home loan repayments

If interest rates have changed since you got your original home loan, which is a likely scenario at the moment, you may be able to refinance to a new home loan with a lower rate. Taking advantage of the current lower interest rate deals may be a fantastic reason to refinance a home loan. When you refinance to a lower mortgage rate, you will be able to lower the amount of interest you pay on your loan, therefore reducing your monthly bill. Reducing monthly repayments ultimately means you will pay less over the life of your loan. You can view the cash rate target on the Reserve Bank of Australia website.

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2) Fixed rate period is expiring

It is very common in Australia to have a fixed rate term of between 1 to 5 years.One common trap that homeowners with fixed rate home loans fall into is that they forget about the revert rate. This is the rate that automatically kicks in once your fixed term ends, and it could go as high as over double the rate you signed up for. You can avoid this by switching to another fixed rate, or looking at your refinance options to maximise your interest rate discount.

3) Be mortgage free sooner 

This is one of the main reasons to refinance. For some homeowners, refinancing is an opportunity to pay off their mortgage faster, and be mortgage free sooner. By hopping onto a lower rate while maintaining your existing monthly repayments, you can shave years off your loan term. For some people, changing the length of your loan term can help pay off your loan quicker. If you can afford higher monthly home loan payments, you could refinance to a shorter loan term and end up saving tens of thousands of dollars in interest payments over the life of the loan.

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4) Property value has increased 

If your property’s value has gotten a boost, you might be able to refinance and get a better rate. Your property’s increased value may make refinancing your home loan a great move. It may be possible to get a better rate and access some of the home equity. You can also use your built-up equity to your advantage —since the market value of your property has increased, lenders will be more inclined to give discounts and better interest rates to borrowers with more equity.

It is best to remember that your financial situation is unique to you and you won’t have the exact same financial goals as anyone else. In the same manner your reasons for refinancing are also unique. While there are heaps of benefits to refinancing your loan, you need to remember there are still costs to complete the loan application, switching fees and some government fees.

No matter what your reasons for refinancing your home loan might be, the mortgage brokers at Euphoria Loans can help you find the right mortgage at a competitive interest rate to suit your needs.

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REFINANCE YOUR HOME LOAN