Things to consider when Refinancing your Home Loan

Things to consider when Refinancing your Home Loan

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Published by TOP4 Team

When you start your hunt for a new home loan deal, you’ll find the market is buzzing with varying home loan types. So take the time to choose a home loan that will work for you. You can also hire a reliable mortgage broker that specialises home loan.

One of the major decisions you’ll need to make is what type of interest rate you’ll choose when you make the switch:

Variable interest rate

This option is made for refinancers that are not only looking for a competitive rate but flexible features as well. For instance, a 100% offset account facility is usually only available with variable rate loans. The major downside of a variable rate loan is that your rate could change at any time, so you’ll need to ensure you budget for the chance of a rate rise.

Fixed interest rate

If you want repayment certainty you could decide to lock in your interest rate with a fixed rate loan. But make sure you’re happy to stay with the home loan for the entire fixed rate term (usually 1-7 years) because if you refinance again during this period you could be charged a break cost fee.

Extra repayments

As mentioned in the scenario of first home buyer Sandra, the feature of an extra repayments facility allows you to make additional payments on your home loan on top of your regular repayments, which could bring down the amount of interest you pay significantly, whilst also shortening the life of the loan.

Split rate loan

An option you could take when refinancing is mixing your home loan between both rate options, meaning a portion will be fixed giving you some rate security and a portion will be left variable allowing you to take advantage of flexible features like an offset account on that part of the loan.

You should also consider the features that will help you pay off your loan sooner. Here are some to put on your refinancing shopping list:

Mortgage offset

Another way to bring down the interest you pay is by refinancing to a home loan that comes with an offset account. A mortgage offset is designed to replace your everyday transaction account, so you can set up your salary to be deposited into it and you’ll also receive a debit card that you can use for purchases and ATM withdrawals. The reason an offset account will reduce the amount of interest you pay is that the balance is offset daily against the home loan principal. So if you have an offset account with a balance of $40,000 and a mortgage of $500,000, you’ll only be charged interest on $460,000.

Flexible repayments

When you begin to search for a home loan worth of refinancing to, you should look for one that allows you to choose your repayment schedule. A thrifty trick that you can use to pay off your home loan sooner is setting up your repayments fortnightly, rather than monthly. For instance, a monthly repayment of $3,000 will mean you’ve paid back $36,000 over a year, whereas a fortnightly repayment of $1,500 will mean you’ve paid off $39,000 - which is a month more over a year.

Looking for a trusted mortgage broker that can help you refinance your home loan? Consult Lendium today!


#Home Loan
#Mortgage Broker
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