Best Time to Refinance Your Home Loan
Refinancing home loan will allow you to take advantage of many cost-saving features. However, it is important that you know the right time to refinance. There’s no conventional template that you can use to know if it is the right time to move. Rather, you must assess your personal and financial situation with the help of professional mortgage brokers or a financial adviser to check the indications whether they are pointing in the direction of refinancing.
Basically, you must perform a financial health assessment at least once every year to check if your home loan is still suitable for your lifestyle. Refinancing a home loan with an even 0.5 per cent lower compared to your existing rate can result to thousands of dollar savings throughout the loan term.
Factors to Consider in Refinancing Home Loan
Determining the right time to find another lender will largely depend on your financial and personal situation such as current earnings, job security, and more. It is best to consult with a professional financial adviser to help you figure out the best time to refinance.
In general, the following factors will help you decide if it is the right time to refinance:
- Potential Increase In Interest Rate
If your lender has already announced a raise in interest rate, it may be the right time to look for another lender who is offering a lower interest rate and other benefits such as an offset account or free redraw facility. You should also consult your financial adviser on possible interest rates increase from the Reserve Bank. However, you should not base your refinancing decision on projections, because interest rates tend to fluctuate and dependent on various economic factors.
- Debt Consolidation
If you are struggling with paying your bills and debts other than your home loan, you may also choose to consolidate these payables into your home loan. This will allow you to easily manage the repayments rather than worrying over separate bills. Through proper restructuring, you can consolidate all your debts into your mortgage to lower down your repayments.
- Job Security and Current Income
Refinancing also has its prerequisites before you can avail. For example, most lenders prefer applicants who have been in the same job for at least one year and has steady sources of income. These criteria indicate that you have the capacity to make the repayments, so you will be categorized as a low-risk borrower with lower interest rates.
You can use our Mortgage Switching Calculator to help you crunch the numbers. You should also consult your financial adviser to help you with these calculations and other related concerns.