When Should You Refinance Your Mortgage?
When should I refinance my home loan? The answer is not that simple as it seems. The most usual reason for switching to another lending professional is to obtain a lower interest rate. But before understanding the other aspects you need to know when do people decide to refinance home loans.
- An individual usually considers home loan refinancing when they reached to end of their fixed rate term.
- Most people think about refinancing their mortgage every 2 to 3 years even if they’re on a fluctuating rate.
Is Now the Right Time to Refinance My Home Loan?
The most probable answer to the above question is yes. With interest rates at a record low, there is an enormous opportunity to save on your current home loan. But every borrower needs to assess their own situation and make the right decision for them. So here are a few things you need to consider before you refinance your mortgage in Queensland.
1. Is Your Current Interest Rate Too High?
Most lenders are offering interest rates between 2-3 percent at the moment. If your interest rate is higher than this, then you’re definitely paying too much. For example, if your loan amount is $400,000 and your current interest rate is 3.45 percent then your repayments would be $1786 per month. If your new interest rate was 1.99 percent your monthly repayments would only be $1477. That’s an approximate savings of $309 per month or $3,708 a year. This is calculated with a 30-year loan term with Principal and Interest repayments.
2. Do You Want an Offset Account?
An offset account is basically a standard transaction account linked to your home loan. You can use it to make deposits or withdrawals as per usual practice, but the big difference is that when there is money in this account you can use it to reduce the amount of interest charged on your home loan. Meaning this could help you pay off your home loan sooner. For example, if you have a $400,000 loan but have $10,000 sitting in your offset account you’ll only be charged interest on $390,000 instead of the full $400,000. There are a few things to consider when working out if an offset account is right for you. Do you want regular access to your money? Are you happy to pay for this offset account, as some lenders charge for it?
3. Should You Look at a Fixed-Rate Loan?
Fixed-rate loans offer the lowest interest rates on the market right now. They are lower than variable rate loans. The benefit of a fixed rate is that rate is locked in for your chosen period of time and you’ll know what your repayments will be regardless of how the market changes. But if the variable rate changes this won’t impact your fixed rate, whether this is an increase or decrease.
4. Should You Break Your Current Fixed-Rate Loan?
You might already be on a fixed-rate loan and want to break it to take advantage of the low-interest rates on offer. Before you do this you need to check what the associated costs will be to break your fixed-rate loan first. These costs might outweigh the savings you’ll gain by refinancing. Talking to your mortgage broker in Queensland is the best place to start if you’re currently on a fixed-rate loan as they can contact your lender and work out what costs will be involved.
Speak to a Mortgage Broker!
At Coronis Finance we know that every situation is unique, that is why we offer personalized service to all our customers. If you would like to chat with us about your home loan refinancing options, please reach out to one of our refinance mortgage brokers.