door no.5

5 signs you need a mortgage refinance

Once homeowners obtain a home mortgage, they may want to avoid having to go through further paperwork and focus on their bi-monthly or monthly repayments.

However, there are many instances that should encourage property owners to rethink their home loan and contemplate a mortgage refinance.

From wanting a cosier home to responding to future jumps in the official cash rate, it's worth keeping an eye out for these tell-tale signs that may say it's time for a refinance.

1. You're dreaming of bigger things

Your first home can seem like the perfect fit, but as the years go by, there's always the chance that it no longer suits your needs.

The kitchen might seem cramped or outdated, you might need more bedrooms for a growing family or you've acquired some unfavourable neighbours in recent months that make you want to shift.

Whatever the reason, it's not unrealistic to dream of bigger and better things. A refinance may come in handy if you need to take out a larger loan to cover the cost of a new property.

Of course, you'll need to have a hard think about your finances. While the grass might be greener on the other side, you do need money to get there.

2. There's been a change in lenders' interest rates

As of April 2014, the official cash rate has remained at a low 2.5 per cent for a steady eight months. This has enabled lenders to offer cheap home loans, giving more Australian individuals and families the opportunity to purchase property.

However, if the cash rate increases, it's highly likely that home loan interest rates will too.

If the Reserve Bank of Australia announces a cash rate hike, this could impact your mortgage repayments. If you're sitting on a variable-rate loan, you might consider fixing your loan for a better sense of security. With a fixed-rate loan, you'll know what your repayments are going to be for the period your mortgage is fixed for, whether it's for one year or three.

3. Your earnings have changed

You might have received a promotion at work or you might have reduced your hours. When homeowners choose to start a family, it's feasible that one parent will take time off work for a while to look after new children.

Whether your household income has taken a hit or risen significantly, it's a change that could nonetheless necessitate a mortgage refinance.

If you're earning more, you can afford to up your repayments. By contrast, if you're earning less, you might wish to refinance your loan to decrease your mortgage payments and ease any financial stress.

4. You want faster results

A home loan is an incredibly significant undertaking. The term of a property loan isn't with you your entire life, but it's there for a large portion of it.

If you want to get rid of your property debt faster, you can shorten the term of your loan, but you'll probably need a mortgage refinance to do this.

Cutting your mortgage term from 25 to 20 years will require you to front up more when it comes to repayments, but you're also going to pay less in interest.

5. You want to change lenders

Perhaps your current lender just isn't working for you. Whether it's the mortgage products being offered or the level of service you're receiving, it might make sense to refinance.

Some mortgage products are very limited, while others offer an extensive range of features. If you want an offset account or a line of credit, you might consider refinancing if your current lender doesn't offer this.

Be sure to explore your options so you obtain the right loan for your needs.

Image credit: Javier Alvarez



This information has been prepared without taking into account your individual objectives, financial situation or needs. You should, before acting on this information, consider its appropriateness to your circumstances.