Should you refinance your home loan?

While finding a lower interest rate is the most common reason for switching home loans, refinancing is also a great option if you are looking to consolidate debt, access equity for renovations, or buy another property.

To decide if refinancing is the right choice for you and your financial situation, consider these four things:  

1: Weigh up the pros and cons

Before you jump into refinancing, it pays to do your research. Compare the savings you will make over the life of your loan with the cost of switching.

Make sure you consider any upfront and ongoing costs associated with exiting your current home loan and switching to a new one, such as the settlement, loan establishment, exit, and mortgage registration fees and charges. Also, you should think about the flexibility of repayments, whether you will need to pay Lender's Mortgage Insurance (LMI), how long you’ll need the loan for, and whether you’re protected against sudden rate rises.

Even though you may decide not to go ahead with refinancing, taking the time to regularly review your home loan is an important part of keeping on top of your finances and ensuring you’re getting a good deal.

Our home loan calculator can help you figure out how much you could save.

2: Determine why you want to refinance

There are a number of reasons you might look to refinance, such as:

• the flexibility to increase or decrease your repayments
• your fixed term rate is about to end
• your circumstances have changed
• to lock in a low interest rate
• to consolidate your debts
• you want to tap into the equity in your home to do renovations or buy an investment property.

Knowing why you want to refinance will help you (or your mortgage broker) figure out which product and lender is the best option for you. Which leads us on to the next step…

3: Compare home loans

Find the product that’s right for you by comparing the various home loans available to you. If you’re not sure how to compare, here are a few things to consider:

• Do you need flexibility in your loan?   This may impact whether you choose a variable or fixed rate product, and whether you can make additional repayments.  
• Are you looking for a credit card? Some home loan products come with a credit card package, but you’ll need to make sure it meets your needs and makes financial sense.
• Do you require an offset account?   Not all products come with an offset account, and you can be charged fees if you do choose that type of product. If you’re not going to be maintaining a large balance in an offset account, you may benefit from a basic home loan that has no frills but offers a lower interest rate. 

You can view and compare our range of home loans to find the product that’s right for you. We can help you with all these options and more, so if you need advice or have any questions, get in touch.

4: Make the switch

Now that the hard work is done, it’s time to make the switch and refinance your home loan by contacting your preferred lender or broker.

If it’s a P&N Bank loan, our team of home loan specialists can help. Our mobile lenders can come to your home or office – or favourite café - and talk you through the details to ensure you fully understand the potential benefits of each loan and any costs that are involved. Or you can drop into a branch and speak with an expert lender there.

Once you’ve decided you’ll need to apply for the loan. And then when your home loan application is approved, your lender will pay off your previous home loan and your new one will begin. Nice!

Want to know more about refinancing a home loan? Our team is here to answer all your questions. Chat online now, give us a call or drop into your nearest P&N branch.