If you’re considering whether to refinance your home loan, timing is key. You may be unsure if now is the best time to refinance, or you may be wondering if you are even able to do this at the present time. Take a look at our short guide to refinancing, and discover more about when you can follow this course of action.
What is refinancing?
Refinancing is the process of exchanging your current mortgage for another one. This may result in a longer term of mortgage repayments that reduces your monthly fees – for example, if you reset the remaining time left on your mortgage back to 30 years. Alternatively, it may allow you to access equity built up in your home to finance another purchase, such as a vehicle, investment property or another asset.
Minimum time period for refinancing your home loan
There are almost no restrictions on when you can refinance a home loan. However, there is a minimum time period you will have to complete before you can explore this option. Generally, you will have to have held the home loan for a period of six months before you will be allowed to refinance.
Remember that just because this period has elapsed does not mean it’s necessarily a good time to refinance. There will still be break costs to consider, as well as other fees and charges associated with refinancing your mortgage. You need to make sure that you will either save money as a result of changing your loan term or that you will gain access to a more favourable deal. Considering this, it may be better to wait until you have completed more of the loan term and reduced more of the principal loan amount before you proceed. The refinancing process can also reduce your credit score, at least temporarily, so bear this in mind.
Positive times to refinance
So, the answer to our question is “yes, you can refinance your mortgage at any time”, but there are better times to refinance than others.
When you find a better home loan package
Many people choose to refinance their mortgage after they find a better deal elsewhere. This requires a few calculations but can be a great way to save you money if you do it at the right time.
Basically, you need to know how much money you stand to save when you refinance. Cheaper interest rates and manageable mortgage payments could see you reducing your monthly expenses significantly, but only if you tread carefully and choose wisely.
Remember to take into account the full comparison rate of your new loan – this is the total cost of the loan you will be taking out once all other fees and charges are factored in. Interest rates, lenders mortgage insurance (LMI), break costs, and other expenses will all be factored into the comparison rate.
When you want to finance a viable investment
You may be able to release equity in your home to finance an investment. This might be the purchase of a commercial property, or it could be a property that you plan to rent out to increase your income.
Remember, if you plan to live in the property you purchase, you will need to apply for a specific owner occupier mortgage facility.
When your fixed rate home loan reaches the end of its term
If your fixed rate home loan reaches the end of its term, you may find yourself exposed to interest increases in the future. This might not be a problem if the interest rate goes down, but you could find yourself paying a lot more should this rate increase.
Refinancing can help you in this case. Your mortgage broker may be able to help you find a new fixed rate mortgage, allowing you to lock in a low rate to protect against future changes.
Learn more about refinancing your mortgage and other loan options
The Sydney Brokers team can help you to understand the refinancing process and connect with the loan you need. We can also help you find a credit card facility or other loan products that suit your needs perfectly. To get started, reach out to our team and book a consultation today.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.