To answer the same, let’s go through it in simple terms to understand it first. The answer could be “Yes” in most of the cases, depending on your current situation.
Let’s dig deeper and understand more on home loan refinancing.
Why Are Home Loan Interest Rates Rising?
The Reserve Bank of Australia (RBA) has lifted the cash rate several times to help manage inflation. When the cash rate rises, banks & lenders usually follow by increasing interest rates on the variable home loans.
If you are on a variable home loan, your repayments may have already gone up. If you are on a fixed rate, you may be heading towards what’s called the “fixed rate cliff” i.e. on expiry of your low fixed rate, interest rate jumps to a much higher variable rate.
This change can mean a huge difference in your budget on a monthly basis.
What Happens If You Don’t Do Home Loan Refinancing?
Many people assume their lender will always offer the best interest rate. But that’s often not true.
Usually, the lenders offer the best deals to their new customers. If you’ve been with the same lender for a few years, you could be on a higher rate than someone who just signed up. This is sometimes called the “loyalty tax”.
Not reviewing your home loan could mean paying thousands more each year. Even a small rate change, in the tune of 0.50%, could add up to big money over the entire life of your loan.
So, you must explore options for home loan refinancing.
Can Home Loan Refinancing Save You Money?
Even though rates are going up with time, home loan refinancing can still help you. Some lenders move slower than others. Some offer better deals or incentives such as cashback to win new business.
It’s not just about chasing the lowest rate. It is actually searching for a home loan which suits where you are currently placed and where you are heading towards.
When Does Home Loan Refinancing Make Sense?
- Your rate is no longer competitive
If your rate is higher than what’s on offer in the market, switching can save you money. - Your fixed rate is ending
Refinancing before your fixed period expires can help you avoid the shock of a high revert rate. - You’ve built up equity
If your home’s value has increased, lenders may offer you better rates or terms. - You want better loan features
Some loans offer features like offset accounts, redraw facilities, or flexible repayments — which can help in a rising-rate market. - You want to consolidate other debts
You can roll the personal loans or credit card debts into your home loan. This can help in better managing the repayments.
What to Consider Before Home Loan Refinancing
See, home loan refinancing isn’t always free. There might be exit fees, new application charges, or valuation costs. If you’re breaking a fixed term early, there could be a break fee too.
But in many cases, the savings you gain from a better loan deal outweigh the upfront costs over time. A good mortgage broker can help you compare the numbers.
Fixed, Variable or Split Loan?
Choosing between a fixed or variable loan can be tricky in this market.
Fixed home loans give you certainty. You’ll know exactly what your repayments are. But they often come with higher rates and fewer features.
Variable loans are more flexible and may offer lower rates now, but they could rise further.
Some borrowers are choosing a split loan. This means part of the loan is fixed, and part is variable. It gives you some stability while still offering flexibility.
Tips for Smart Home Loan Refinancing
- Compare interest rates from a wide list of lenders & not just your current dealing bank
- Check your home loan every year or after a big life change
- Speak to a professional broker, who knows the current loan market environment better
- Begin early in case your fixed term is ending soon
How Loan Junction Can Help?
Every homeowner’s situation is unique. We have a team of experts at Loan Junction, which listens closely to your requirements and tailor the refinancing options best suited your present and future goals. Whether the aim is to lower monthly repayments, consolidate debts, or finding a better deal, we offer help at each and every step.
Ready for Home Loan Refinancing in Australia?
A quick loan check could lead to big savings. Even in a rising-rate environment, the right refinance move can make a difference.
Contact us today on info@loanjunction.com.au
Let your home loan work for you & not against you!
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.