Do you need to refinance your owner occupier home loan? It may be because the loan term has ended, or because you think there are better loan features out there, or because you want to access some of the equity you have built up in your home.
How does home loan refinancing work?
Refinancing your home allows you to obtain a better rate, term, or other features like an offset account or extra repayments and redraw facility. You may choose to refinance by getting a better deal with your existing lender, or switch to a new lender. It's not a question of getting a mortgage for your new home, but a new mortgage for your current home. Your new lender (or the same lender if you're not switching banks) will pay out your existing loan with some or all of the funds from your new loan.
Reasons why you should refinance your home loan
You may decide on home loan refinancing for any of the following reasons.
Original loan about to come to the end of its term
When your existing deal expires, it is highly likely that your monthly repayment will change. And depending on the terms of the deal you had, your new monthly repayment may be higher or lower. Refinancing is an opportunity to take control of that.
Lower rates available than what you have
Perhaps you took out your current deal several years ago and in the interim, the landscape has changed substantially. This is the situation many Australians find themselves in today. Assuming your current deal is no longer competitive, refinancing means you can lock in a new lower rate.
Switch from a fixed rate to a variable rate (or vice versa)
Your current loan may be interest-only and you've decided to repay the principal, or maybe you just want the lowest possible interest rate regardless of it being fixed or variable. When you refinance, you can compare the market and decide what's best for you as you plan for the future.
Reduce monthly payments by opting for a longer repayment term
A lower interest rate is one way to reduce your monthly repayments, but when you refinance you can change the repayment term too. If the interest rate stays the same then this will cost more in the long run, but if you want to have more cash at hand at the end of the month and don't care about the total amount repaid, then extending the repayment term on your loan is an option when you refinance.
Better features, e.g. offset account, extra repayments, or redraw
Maybe you earn more now and can afford to put money into savings or even repay an extra amount every month. Perhaps you just want the flexibility to draw down funds. When refinancing, you can choose a loan with the features that suit you and your finances.
Access equity built up in your home
Whether you would like to renovate your home or buy an investment property, refinancing is an opportunity to access the equity in your home and use it.