Home Loan Refinancing: Why use a Mortgage Advisor?

Around 2,300 Australians are taking advantage of a better deal on their home loan, choosing to refinance their mortgage after eleven rate rises since April 2022. However, the analysis presented to the Senate by Australia Banking Association (ABA) has found those refinancing decided to move to another bank or home lender.

Banks have responded with various incentives and cashback, with most customers choosing to refinance away from their existing lenders.

Before taking the leap, which may put you in a better financial position to deal with the cost of living, consider what switching your home loan will mean.

Let’s explore how to benefit from refinancing your home loan and be mindful of any risks you need to know. 

What is refinancing your home loan?

Refinancing your mortgage means replacing the existing loan with a new one. For example, you can refinance your home loan with your current bank or lender or switch to a new financial institution. 

 For many homeowners and investors, refinancing your home loan is often driven by a desire for lower interest rates and fees, resulting in lower or more affordable repayments.

Others may refinance to access their home’s equity for other purposes, such as using this to purchase more properties for investment. For example, you refinance your existing mortgage and replace it with a new loan, generally for a more significant amount, so you can use the ‘cash-out’ to fund other lifestyle goals (e.g. home renovation or extension).

Sometimes, a home loan refinance adds or removes someone from the mortgage or the Certificate of Title. 

How does refinancing with a Mortgage Advisor help you?

A  Mortgage Advisor can  source a more competitive interest rate which helps lower your repayments and pay off your mortgage sooner. Refinancing your home loan and paying your existing repayments, but at a lower interest rate, you can potentially take years off your loan term.

Another way to take advantage of your lower interest rate is to reduce your loan term. Whilst this could increase repayments in the short term, you can save years in extra interest charges.

Unlock your equity for other financial and lifestyle goals

You know that renovating your home or finding money for a dream holiday takes time to save. But if you’ve built equity in your property, refinancing your loan can help you achieve these goals more quickly.

Many banks and lenders generally allow you to borrow up to 80% of your home's value when refinancing.

For example, if your current home in Norman Park is valued at $1,200,000 and your existing home loan is $600,000, you could borrow up to $960,000 (total). Which means you have available equity of around $360,000.

To learn more about how much you could borrow for your dream home or investment property, take our 60-second quiz.

Access to new home loan features

Over the life of your home loan, your bank or lender may have introduced new features that can save you money or provide extra convenience, such as an offset account, redraw facility or even a line of credit.

Let’s say you owe $500,000 on your home.

If you had an offset account with $50,000 in it, you would only be charged interest on the debt of $450,000, which could save you thousands of dollars over your loan term.

Your Advisor can assist in helping you consolidate your other debts.

You may be able to consolidate other debts, such as credit cards or personal loans, when refinancing your home loan to take advantage of a lower interest rate.

However, you need to be aware that while having one repayment is convenient, consolidating these other debts into a longer loan term will result in you paying more interest. In other words, a five-year personal loan refinanced into your mortgage means that a portion of debt could be charged interest over twenty-five years (or your loan term).

Do you need help refinancing your home loan?

In an interest rate environment where your overall mortgage strategy is just as important as which Lender we advise you use, its important to seek client centric advice that has your best interests in mind.

Contact our Mortgage Advice team for a complimentary 15-minute Discovery Call to review your home loan.