When Can I Refinance My Home Loan?

Do you want to join countless Aussies who are refinancing their home loan? Around 28% more Australian homeowners have completed home loan refinance transactions compared to the previous year.

You may be able to take advantage of lower interest rates in some cases by refinancing your home loan. You could also potentially withdraw cash out of your home equity for that big purchase you have always wanted to make or perhaps to use as a deposit for another purchase!

What Is Refinancing?

Refinancing is switching your home loan to a better deal, sometimes with a different lender. When you stay with your original home loan lender, you may not be receiving the best deals available. Many lenders keep the best rates for new customers to attract them to their company.

You can save a significant amount of money by switching to a lower-rate home loan, allowing you to keep more of your hard-earned cash! Refinancing your home loan is often a straightforward process.

But, when should you renaissance your home loan? The best time to refinance is when your mortgage term is running out and you need to look for a better deal.

Find the latest home loan interest rates with your current rates to review your current home loan and decide if it’s time to refinance.

Get a free Australian mortgage assessment today.

Get a free recommendation with real rates and repayments.

Why Should I Refinance My Home Loan?

Refinancing your home loan can save you money if you switch to a lower interest rate. Perhaps your credit score is now higher and better rates have opened up to you? Or, maybe you want a shorter or longer loan term?

Many homeowners refinance to withdraw a portion of equity from their homes. You could take this cash to renovate your home, make an investment, or purchase a luxury car or holiday.

You could also refinance to switch to either a variable rate, a fixed rate, or a split rate home loan. But, what benefits would each type of home loan offer you?

Variable Rate

Variable rate loans can sometimes be the more affordable option, but it depends on current rates. They provide you with the flexibility to switch deals as often as you like. No exit fees are required to do so!

Although, to regularly switch to variable rate home loan deals, you must be in tune with the predicted rate rises. Pre-empting increases and switching to a lower rate deal could save you a lot of regular cash!

Odin Mortgage’s broker experts are the professionals you need to switch to a new variable rate loan. We are Expat experts with vast knowledge of home loans in Australia!

Fixed Rate

A fixed-rate home loan can give you peace of mind in a worrying economy. Refinancing to a fixed rate for a set period may ensure your repayments are fixed and do not fluctuate, depending on the lender terms.

You can budget more effectively with a fixed interest rate home loan. However, any exit fees for selling or switching loans during the fixed period depend on your loan terms.

Split Rate

A split rate home loan can help you enjoy the security of a fixed rate deal and the flexibility of a variable rate deal.

Switching to a split-rate mortgage involves assigning a portion of the loan to a fixed interest rate. The remaining portion of the home loan is placed under a variable interest rate deal.

Many homeowners consider a split rate home loan the future of mortgages, tailoring the refinancing to your preferences.

How Much Could I Save When Refinancing?

The amount you can save by refinancing your home loan depends on your current interest rate compared to available refinance rates.

You could save a nice chunk of money each month through refinancing, building to a substantial saving across the loan term.

How Does Refinancing Work?

Refinancing your home loan will override your current home loan deal. A new home loan is agreed to by your new lender, and your old lender will receive their money back.

To refinance your home loan, you will first need to provide your information and evidence to your broker. Your broker will ask you what your reasons for refinancing your home loan are.  We will then find you a range of great deals across our database of lenders, providing you with options to meet your needs!

You can refinance to the deal that you want, quickly from any global location. We are expat specialists who can help you with your Australian mortgage and refinance!

Get a free Australian mortgage assessment today.

Get a free recommendation with real rates and repayments.

Are There Different Types of Refinancing Loans?

There are three types of refinancing that you could consider to ensure you get the best home loan deal for your circumstances.

Cash-Out Refinance in Australia​

If you want to cash out a chunk of money from your home’s equity, this is the refinance loan for you!

You can refinance your home and take out a lump of cash in the process. Your repayments will increase, however, as you are borrowing more money. Although, releasing the cash enables you to extend and renovate your home, or make a great investment or luxury purchase!

To qualify for a cash-out refinance, you typically need to have at least 20% equity in your home based on its current valuation. This provides the lender with enough collateral for the higher loan amount.

Most lenders in Australia will allow you to take out up to 80% of the equity you have built up in your home. So if your home is valued at $500K and you owe $300K on your current loan, you could potentially take out up to $100K in cash.

The new loan amount would become $400K after refinancing in this example. This higher loan balance means higher loan repayments, so you need to factor that in to ensure you can afford it.

Interest rates on a cash-out refinance also tend to be 0.5-1% higher than standard variable rates. This factors in the higher risk for the lender of lending at a higher loan-to-value ratio.

Cash-In

If you want to pay off a portion of your home loan, you may be able to refinance to do this. Your current home loan may only allow a set amount to be paid in extra installments per year. Paying a large amount of money off the loan may require a refinanced loan.

Taking this option should reduce your monthly repayments and may even reduce the loan term. This will result in paying much less interest across the loan duration, saving you a great deal of money!

Rate and Term

Changing the rate and the term of your home loan can help to reduce costs. The loan amount stays the same and you do not receive any lump sum of cash.

You can choose this option to take advantage of competitive interest rates and offers or to reduce the loan term available.

Is a Refinance Home Loan the Same as a Mortgage?

A refinance home loan is taking out a new mortgage to overtake your original mortgage. Your new lender pays off the original mortgage and you now owe the new lender the amount borrowed.

Refinancing is also known as a ‘remortgage’ in some parts of the world. This term is perhaps easier to understand as you are re-doing your mortgage on the same property.

You could agree to a lower rate, reduced terms, or equity withdrawal in a lump sum.

Can You Borrow More When You Refinance?

You can choose to borrow more money when you refinance, providing your home has sufficient equity available.

You could take this cash from your home equity to renovate or extend your home. Or perhaps you want to buy a second home and need cash towards a deposit? 

Whatever the reason, Odin Mortgage can help you secure a great cash-out refinance loan and let you access YOUR money!

Of course, when you borrow more money, your repayments will increase. A refinance home loan could still achieve a lower interest rate and shorter loan term, however, despite increasing the amount borrowed.

Does Refinancing Hurt Your Credit?

Refinancing your home loan won’t hurt your credit, although the application itself will leave a hard inquiry on your credit report

A hard inquiry may reduce your credit score slightly. This will only offer a negative impact on your refinancing application if your score is borderline between being ok and good.

However, making several hard inquiries within a short time frame can impact your credit score. Seeking the services of a professional mortgage broker reduces the chance of multiple hard inquiries occurring due to the processes we use.

If you decide to take a cash-out refinancing loan, the amount of money you owe on the new loan will increase. This may impact your credit score when a higher amount of debt is recorded.

What are the Pros of Refinancing My Home?

Refinancing your home loan is a simple task for your mortgage broker to complete. However, you must be fully clear about the pros and cons of refinancing your home loan, before leaping.

Here are the benefits of taking out a refinancing home loan.

Lower Interest

Sensible homeowners are always looking for the latest and greatest home loan deal! Refinancing your home loan can ensure that you achieve a lower interest rate and save you money each month.

The accumulation of these savings is staggering across the year, and certainly across the loan term!

Shorter Home Loan

You could also reduce the loan term and shorten your mortgage. If your original mortgage spanned 20 years and you refinanced to a 15-year loan, you will save 5 years of interest!

Your monthly repayments will likely increase when you shorten the home loan. However, throughout the loan, you will save a considerable amount of money!

Change Loan Type

Are you in a variable interest rate home loan and want to switch to fixed-rate loan repayments for stability? Or, are you at the end of a fixed interest rate home loan and want a variable rate to enjoy reduced repayments?

You can change the type of loan you have by seeking a broker service. We can advise you about the best loan types for your circumstances and the current climate.

Make the right decision at the right time!

Cash-Out

Do you need to withdraw some of the equity from your home? You can refinance your home and take out a lump of cash in the process.

Your repayments will increase, however, as you are borrowing more money. Although, releasing the cash enables you to extend and renovate your home, or make a great investment or luxury purchase!

Offset Account

Lenders are offering new features to their home loans in a bid to beat the competition and look attractive to the customer.

Ask your mortgage broker about how offset accounts work when you refinance. An offset account can be used to reduce the interest payable on your home loan. 

For example, let’s say you owe $500,000 on your home loan. You place $150,000 in an offset account. This is still your money but is temporarily placed in the offset account. The money in the offset account reduces the interest you pay, so you only pay interest on $350,000.

Redraw Facilities

Lenders may offer redraw facilities. This enables you to pay extra payments off your home loan debt, without charge. 

You are then able to ‘redraw’ the extra money you paid into the home loan debt if you wish.

Get a free Australian mortgage assessment today.

We provide free recommendation with real rates and repayments.

What are the Cons of Refinancing My Home?

Are there any cons to be aware of when applying for refinancing? Here are the disadvantages of taking out a refinancing home loan.

Lender Fees?

Always be clear as to what fees are payable. Firstly, will your current lender allow you to switch to another lender or a different deal? 

If you are on a variable interest rate deal, then you should be able to refinance your home loan easily. There should be no fee payable to be released from the home loan deal.

Is your fixed interest rate home loan coming to an end of the fixed period? If so, you should be able to switch deals without paying a fee. If you are still bound by a fixed rate deal, you will need to pay an exit fee to be released.

Refinancing Fees

Some lenders and brokers may charge you a fee for their service and for securing your home loan.

Can You Refinance a Split Loan?

To refinance only the first mortgage, you would need to qualify based on that loan amount alone, while the second lien would remain unaffected. To refinance the full split loan into one single loan, your lender would underwrite you based on the total combined loan amount of the first and second mortgages. 

Consolidating into one new loan can potentially get you a lower interest rate on the whole balance and simplify having just one monthly payment, but you’ll need to qualify for the higher total amount. Either option will incur closing costs and fees. 

Consult with your lender to review whether it makes sense to refinance just the first mortgage or the complete split loan based on your financial situation and goals. With proper qualification, refinancing split home loans is certainly possible.

How Often Can You Refinance Home Loan?

When it comes to refinancing a home mortgage, there are several factors that determine if and when it makes sense to do so. Most mortgages have a minimum seasoning period of around 6 months, meaning you need to have had the mortgage for at least that long before you can refinance.  As a general guideline, every 2-5 years is a reasonable timeframe to consider refinancing if the numbers make sense based on your situation. 

Additionally, you typically need at least 20% equity in your home to qualify for a refinance. If your home value has appreciated enough that you now have 20% equity, even if you didn’t originally, that can make you eligible. Beyond equity and seasoning requirements, your interest rate and financial situation are important considerations. 

If current interest rates are at least 0.75% lower than your existing rate, refinancing may be beneficial to obtain a reduced rate. However, your credit score and debt levels need to have remained stable or improved since you originated your mortgage, as lenders will re-evaluate your finances. 

While there are no strict limits on how often you can refinance, doing so too frequently can incur fees and costs that outweigh the benefits. 

How Can I Refinance My Home?

Odin Mortgage are expat experts who will find you the perfect refinancing home loan option! Simply get in touch with our specialist brokers and start your refinancing application today! Contact our expert mortgage brokers to refinance your home! We will help you put together a winning application together with your own evidence. 

We will then match you to a selection of lenders offering refinancing loans that would suit your needs.

Lenders will assess the following information:

  • Your existing loan
  • Your home loan payment history
  • How much equity is in the home
  • Your credit score
  • Your income
  • Your employment history
  • Any debts you have

If you have maintained all repayments for your home loan on time, lenders will love to make you a loan offer! A great credit score and minimal debts will make your application even stronger.

However, if you have a less than perfect credit history, do not despair! Odin Mortgage’s expert brokers will negotiate a fantastic loan offer for you. We act as a third-party intermediary, working between you and the lender to reach a great deal!

Assess your own borrowing power by using our Borrowing Power Calculator.

Request a call from Odin Mortgage now to discuss your refinancing home loan choices in Australia!

Get a free Australian mortgage assessment today.

We provide free recommendation with real rates and repayments.

Frequently Asked Questions

Your mortgage repayments consist of principal and interest repayments. Your principal repayment is the amount of money you pay each month to pay back the money borrowed. 

Each principal repayment reduces the amount of money you owe the lender.

Interest repayments are also paid monthly although this money does not reduce your home loan account. The lender receives this money in its entirety.

Usually, you will pay home loan repayments in one instalment each month. Therefore, you may not realise you are paying principal and interest repayments! This should be clearly written on your annual mortgage statements, however.

You will only need to pay lender’s mortgage insurance if there is less than 20% equity available in your home.

If you have agreed to a cash-out refinancing home loan, there is a chance that your equity will shrink considerably. This depends on how much money you have taken out of the equity, and the equity available in your home.

If there is less than 20% equity left in your home after refinancing, you may have to pay LMI. This is merely an insurance cover to protect your lender’s finances in the event of defaulting repayments. 

It is an extra expense for you to pay monthly, however, and so should be avoided if possible.

The refinancing lending criterion is very similar to the criteria used by your existing lender when you secured the original mortgage.

Lenders will examine your ID, your income and employment, and your assets. Lenders will also assess your debts and expenses, and determine your borrowing power.

In addition, your home will be assessed. Lenders may ask for a valuation of your home to assess the value of the equity present. This would certainly be a requirement if you want to take cash out of the equity.

Your repayment history with your existing lender will also be looked at to determine what type of borrower you are.

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