Taking out a mortgage is a significant commitment that could last 30 years, but you are free to leave your lender whenever you please.
In fact, replacing your current home loan with a new one every few years – most often by switching to a different lender – may be a smart move; the process is called refinancing.
There are, however, good and bad times to make such a change so it is advisable to meet with a reputable finance broker in Sydney for guidance.Refinancing can be beneficial if you are looking for a lower interest rate or additional loan features. Borrowers also refinance their home loans when they need to to access equity in their properties or come to the end of a fixed-rate loan term.
Common reasons to consider mortgage refinance
There are several good reasons for refinancing home loans in Sydney, some of which include:
Securing a better interest rate
Lower loan-to-value ratio
If your home’s value has increased and the amount you owe on your principal loan amount has come down through your monthly repayments, your loan-to-value ratio (LVR) is likely to have dropped. A lower LVR may help you secure a new mortgage with a lower interest rate.
Better offer from another lender
A different lender may be offering lower rates for refinancing home loans, which you may be able to obtain by making a switch.
Locking in a lower rate
In low-interest-rate environments or periods where rates are going up, mortgage refinance allows borrowers to fix their home loans at current rates. But while there are benefits to this there are also risks. Therefore, it is a good idea to consult with a mortgage broker in Sydney for expert advice on your best home loan refinance options.
Accessing equity
Equity is the present value of your property minus how much you still owe on the principal loan amount. The longer you have been paying off your mortgage, the more equity you are likely to have.
Equity is the portion of your home that you own outright. For example, if you took out an $800,000 loan to buy a $1 million property, your initial equity would’ve been $200,000; but if your loan has since been reduced to $750,000 and your property has increased in value to $1.2 million, your equity would now be $450,000.
By refinancing your existing home loan, you may be able to gain access to this equity. You can then use this money for a number of things such as:
- Paying off other debt
- Buying another property
- Renovating your home
- Buying a car
- Funding a holiday
Property owners would be wise to seek guidance and advice from a mortgage broker in Sydney, such as Loan Station, before refinancing their homes.
Changing lenders
Better service and products
If you are not happy with the level of customer care from your lender or aspects of their products or service offerings, you can move to a different lender who is able to meet your needs.
Extra loan features
Another lender may be able to offer you additional mortgage features such as:
- Flexible repayment options
- Redraw facilities
- An offset account
Better loan terms
Replacing your current mortgage with a new loan can also give you the opportunity to change the length of your repayment period.
Best home loan refinance tips for 2024
1. Monitor interest rates
Keep an eye on cash rate fluctuations and interest rate outlooks. Interest rates play a crucial role in the decision to refinance home loans in Sydney. Mortgage refinance may be a good option when interest rates are low or expected to increase.
2. Understand your current home loan
If you don’t understand the terms of your current mortgage – such as your interest rate, repayment term and other conditions associated with the loan – you may not be able to accurately evaluate whether a new loan will, in fact, be better.
3. Check your credit score
Like new applications for new home loans, a strong credit score is important if you wish to find the best home loan refinance options or lowest rates for refinancing home loans in Sydney. So, before applying for mortgage refinance, it is a good idea to check your credit score and, if possible, take time to improve it.
4. Understand the pros and cons of new loan terms
While refinancing homes creates opportunities to adjust certain conditions of your mortgage – such as the length of the term or type of loan – it is prudent to not only consider the benefits of these changes, but the risks. For example, a shorter loan repayment term will reduce the costs of interest but your monthly repayments will be higher.
5. Factor in extra costs
You are likely to be charged fees by both your current and new lender when refinancing. These costs can vary so it is recommended that you factor these into your decision-making process.
6. Shop around and compare offers
Searching for the best home loan rates in Sydney is as important for property owners considering refinancing as it is for Sydney first home buyers. Every mortgage lender uses their own methods to calculate the interest rate they are willing to offer so it is recommended that you compare offers from more than one lender.
7. Consult with a mortgage broker in Sydney
If you are not sure whether mortgage refinance is a wise choice for you, home loan brokers in Sydney can help you weigh-up the advantages and disadvantages.
The benefits of mortgage refinance
Refinancing your home loan in 2024 can be a strategic way to save money, access funds or adjust loan terms to better suit your needs. By staying informed about interest rates, evaluating your current loan, maintaining good credit and exploring all options, you can make a well-informed decision.
Loan Station is an experienced finance broker in Sydney that can help you navigate the refinancing process and look for the best home loan refinance offers. Careful consideration and planning is important so get in touch today for expert guidance.
