According to the Mortgage and Finance Association of Australia the answer to that question is simple.
Whenever it makes good financial sense for you to do so.
In the past, most people who took out a mortgage loan doggedly continued with it until they had paid it off.
These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is under five years.
Here are some of the reasons people in Australia refinance their home loan.
But be careful you don't become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new one.You need to be sure that in refinancing your home loan that you'll be better off in the long run after taking into account all costs.
An example is a Redraw Facility, which is the ability to pay extra money into a home loan and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their home loan to give themselves this sort of increased flexibility.
Refinancing your home loan with a home equity loan might let you tap into some of that extra $200,000 equity.
This article is reproduced with thanks to the Mortgage and Finance Association of Australia (MFAA).
Whenever it makes good financial sense for you to do so.
In the past, most people who took out a mortgage loan doggedly continued with it until they had paid it off.
These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is under five years.
Here are some of the reasons people in Australia refinance their home loan.
1. Lower rate
The most common reason for people to refinance their home loan is to get a better deal.But be careful you don't become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new one.You need to be sure that in refinancing your home loan that you'll be better off in the long run after taking into account all costs.
2. More flexibility
Many people only discover the full details about their home loan when it's too late. They try to do something and get told by their Lender that either they can't do it, or they will incur a hefty charge if they do.An example is a Redraw Facility, which is the ability to pay extra money into a home loan and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their home loan to give themselves this sort of increased flexibility.
3. Renovation
If you carry out renovations, it often makes sense to refinance your home loan and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.4. Home equity
Over recent years in the property market houses have appreciated at a significant rate.For example a home you bought for $300,000 five years ago, might now be worth $500,000.Refinancing your home loan with a home equity loan might let you tap into some of that extra $200,000 equity.
5. Over commitment
Some people find they have borrowed more than they can comfortably repay. If you're having trouble making your mortgage repayments, then you could refinance your home loan to reduce the monthly repayments.This article is reproduced with thanks to the Mortgage and Finance Association of Australia (MFAA).
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