How often should you refinance your home loan?

A lot can happen in that time. Your circumstances can be expected to change considerably as you switch jobs, have kids, and experience financial windfalls and setbacks. All of these events can be triggers to review your major financial commitments, including your home loan. You may also find that the market changes and that some lenders are offering features or low fees that your current lender simply won't match.

For all of these reasons, it's a good idea to review your mortgage to see if it is still suitable for your circumstances and still represents good value. 

Whatever your situation, refinancing your home loan can have benefits including:

  • It can help you save money in the long run with a better interest rate,
  • It can help you consolidate multiple debts onto your cheapest interest rate, which is generally your mortgage,
  • It gives you the option to pay off your home loan faster if you decide to change your term.

There are no rules on how often you can refinance your home loan. However, you will need to meet the credit requirements of the lender. These will include the usual credit history, income, and assets criteria you had to pass to get a loan in the first place. 

With that in mind, you need to think carefully if it makes financial sense to replace your old home loan or not. Here are some things to consider before you decide to refinance your home loan:  

  • Costs – Refinancing your home loan will come with costs, like loan application fees for new loans, mortgage discharge fees, or break costs if your home loan has a fixed rate. Some lenders also offer a "no-cost" refinance, which usually means that you will pay a slightly higher interest rate to cover the closing costs.
  • Lenders Mortgage Insurance (LMI) – If you have less than 20% equity in your home, you may have to pay Lenders Mortgage Insurance. This is because you cannot transfer the existing LMI to the new loan, despite the fact that your previous lender is no longer at risk.

It’s imperative that you do your research and compare your current home loan to the new loan you’re considering in order to ensure that you really will be better off.

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