Renovations, debt consolidation or fixed periods ending – there are many things that prompt people to refinance their home loan. Smart home owners, however, take a more proactive approach. Here’s what you need to know.

Refinancing happens when you make a change to your home loan or more commonly change banks. For most people who choose to refinance there’s a trigger – they’re having another child and need that fourth bedroom, or their fixed period’s come to an end and their home loan has gone onto the standard variable rate.
There’s no need to wait until you have to refinance, however – and the smart thing to do is look around and strike when the best deal’s available.
As well as being able to reduce your monthly payments, refinancing can give you access to a whole host of other benefits.

When shouldn’t you refinance your home loan?
There are times when you probably shouldn’t refinance and it usually comes down to the costs associated with getting out of your current loan.

Most lenders will offer attractive headline rates to people looking to refinance But you need to make sure you look deeper and compare the real cost of the loan.

– Pay attention to the variable rate that your loan will revert to at the end of the honeymoon or fixed period
– Consider any upfront fees you’ll need to pay for switching, such as establishment fees, valuation and legal fees and even lenders mortgage insurance (LMI) or low deposit fees (LDF).
– There are the potential fees from the lender you’re leaving. These might include discharge fees for ending your loan early and, if you’re on a fixed interest rate, a potential penalty – in the form of break costs – for ending your loan before the fixed term expires.

Better again, you should even look beyond the loan terms and consider your finances more holistically.
Consider the other features you currently receive or are being offered too. Your loan may be bundled with other products such as credit cards or offsets with linked transaction accounts. Factor in the cost of replacing these too.

When should you refinance your home loan?
In today’s competitive market, there are many reasons for you to consider refinancing

Banks are constantly introducing new product features to attract borrowers – As well as lower interest rates, some home loans offer features such as multiple offset accounts, fee-free extra repayments and some even offer offset accounts on fixed rate options. Each of these has the potential to save you a substantial amount of money and shave years off the term of a home loan.

What should you do before refinancing?
Before refinancing, you should contact your existing lender to see whether you can negotiate a better rate than you’re currently receiving from them.
If you lender does not want to play ball then it is time to think abot actually refinancing.
Today, refinancing can be a relatively painless process with less paperwork than you might think.

And if you want to make sure you have all angles covered, talk to your mortgage broker about your refinancing options.

It’s quick and easy to apply for refinancing online, and in no time at all you will be enjoying all the benefits of your new home loan.

Take a proactive approach to your home loan – speak with one of our home loan specialists today by calling 1300 855 244.

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