How Often Should You Refinance?
From time to time, homeowners are advised to ensure that their home loan is still right for them by conducting a mortgage health check. Home loans and rates are always changing, and you may find that refinancing could save you thousands of dollars.
So how often should you refinance your mortgage? You may not like the answer, but it’s really quite simple: It depends.
Homeowners refinance their mortgages for many different reasons, mostly pertaining to financial gain. A homeowner might refinance to get a lower interest rate, shorten their mortgage, switch to a fixed rate mortgage, consolidate debts or take advantage of their property’s equity.
But refinancing does involve some costs. If you switch to a significantly better loan, you should make up for those costs in just months. Still, said costs must be taken into account when you’re making your decision.
Although there’s no set-in-stone “refinance frequency” that we can recommend, there are particular events and factors that can influence when the time is right to conduct your health check and ask if you should refinance:
The official cash rate
The Reserve Bank of Australia (RBA) meet on the first Tuesday of each month to determine whether Australia’s official cash rate needs to be adjusted. They choose this figure based on a number of factors including but not limited to unemployment rates, inflation and international economies.
The state of the cash rate can determine whether or not it’s a good time to refinance. Consumers and banks alike must adapt to the changing cash rate, and these adaptations may result in particular lenders having extra-low rates or offering mortgage packages that are ideal for your situation.
We don’t advise changing your loan every month with each cash rate fluctuation, but it’s certainly good financial practice to keep your eye on it and be aware of any opportunities as they arise.
Fixed rate borrowers need not worry about rate hikes. But if you’re on a variable rate home loan, you may experience a slow rate increase. These increases aren’t always related to the RBA, and you may not even notice them unless you keep a close eye on your finances.
If you notice your rate rising over time, it may be time to consider refinancing.
Life is complicated, and things change over time. You may find yourself paying for features you no longer need, or needing features your current home loan doesn’t provide. In either scenario, it may be time to refinance.
If you haven’t conducted a health check in a while, contacting a lender about your “feature fit” could be of huge benefit. You can speak to Mortgage House about our home loan options by following this link.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of changing up your mortgage, you can contact us for advice about the best options for you. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.