What is refinancing?

Refinancing could save you thousands depending on the terms of your arrangement, so it pays to do your homework before taking on a new home loan.  In basic terms, refinancing is replacing your current home loan with a new one that is more aligned with your personal circumstances and financial objectives. Exploring the option to refinance every two to three years can serve as a ‘home loan health check’ to make sure you are getting the best option available to suit your needs. Even more, reasons to consider making a change Depending on your personal circumstances and what you want to do with your money, refinancing can help you:

•         Get a better offer on your existing loan - by lowering the repayments on your existing loan or saving on the overall cost of the loan by finding a more competitive option;
•         Consolidate your debt - if you have credit cards, a car, or personal loans you may be able to fold these into your home loan and save on interest repayments;
•         Renovate your property - refinancing can allow you to borrow extra funds to add an extra room, build your dream kitchen or revamp your garden - all of which could add thousands in value to a property you already own. What's more, with the Federal Government's Home Builder grants of up to $25 000 (available to eligible owner-occupiers1), you could stretch your budget even further on building contracts signed before 31 December 2020; and

·         Unlock equity - refinancing may also help you access the equity in your current property to borrow funds to buy an investment property or just have extra funds available if you need them. Refinancing is the process of replacing an existing mortgage or loan on a property with a new one. This new loan typically comes with different terms, such as a new interest rate, loan duration, or lender. Homeowners and borrowers opt for refinancing for various reasons, including:

1. Lower Interest Rates:Refinancing can help you secure a loan with a lower interest rate than your current one, potentially reducing your monthly payments and overall interest costs.
2. Change in Loan Type:You can switch from a variable rate mortgage to a fixed-rate one or vice versa, depending on your financial goals and market conditions.
3. Access to Equity:Refinancing allows you to tap into your home's equity, turning it into cash for other purposes, like home improvements, debt consolidation, or investments.
4. Loan Term Adjustment:You can alter the duration of your loan. For example, you can refinance a 30-year mortgage into a 15-year one to pay off your debt faster, although this may lead to higher monthly payments.
5. Consolidating Debt:Some borrowers use refinancing to consolidate multiple debts, such as credit card balances, into a single mortgage payment with a potentially lower interest rate.
6. Removing or Adding a Co-Borrower:Refinancing can help you remove or add a co-borrower from the original loan, often due to changes in your personal or financial situation.
7. Better Loan Features:You might refinance to obtain a loan with improved features, such as lower fees, fewer restrictions, or more flexibility.

Refinancing can offer financial benefits, but it's essential to carefully assess your specific circumstances and objectives before proceeding. Additionally, refinancing often involves associated costs, such as application fees, appraisal fees, and potential prepayment penalties, which you should consider in your decision-making process.