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How soon after getting a mortgage can you refinance?

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Refinancing can save you money and lower your monthly repayments. But how soon after you’ve taken out a new mortgage can you switch your home loan?

Before we answer that question, let’s explore why you might want to finance.

There are many reasons you might want to refinance your mortgage, including:

Switching to a lower interest rate

Home loan rates can change frequently as they are influenced by both market forces and the official cash rate set by the Reserve Bank of Australia (RBA). Reducing your rate even slightly can make a big difference to your monthly repayments and the total interest you have to pay back, saving you a significant sum over the life of your loan.

Reducing your loan term

Refinancing onto a shorter loan term is another way of saving money in the long run. That’s because the faster you repay your mortgage, the less you have to pay back in interest. However, a shorter term can increase the size of your monthly repayments – something you would need to factor into your calculations. 

Getting new features

Home loans are more than just an interest rate. They can come with features, including redraw facilities, offset accounts and the ability to make extra repayments that can help you save on interest and pay down your loan faster.

Accessing equity

Equity is the difference between the market value of your home and the amount you owe on your mortgage. You can pull out some of this equity by refinancing your home loan, and then use the equity to fund, say, the deposit on an investment property.

Consolidating debt

If you have multiple forms of unsecured debt such as credit cards and personal loans, you can roll them all into your home loan by refinancing. As home loan rates are typically lower than unsecured loans, this can save you on interest costs. However, debt consolidation is not suitable for every borrower so get professional advice first.

How often can you refinance?

There are no rules on when you can and can’t refinance your home loan. So, technically, you can switch whenever you like. But it might not be a wise move if your mortgage is less than one or two years’ old.

The reason why is that refinancing often comes with costs including:

  • Application fees (for your new loan)
  • Mortgage discharge fees (for your old loan)
  • Break fees (if you have a fixed-rate home loan)

These costs can outweigh any savings you’ll make, especially when a mortgage is relatively new.

That doesn’t mean you should ‘set and forget’ your mortgage. Rather, review it regularly to check if your rate is still competitive and the loan still meets your needs and goals.

As a general rule, it’s also a good idea to review your loan when:

  • The cash rate changes – as even small differences in interest rates can make a big difference to your overall costs
  • Your fixed-rate period is ending – as you could be moved onto an uncompetitive variable rate
  • Your circumstances have changed – as your home loan may no longer be the right fit
  • Property prices have risen – as you might be able to qualify for a lower rate if you have more equity in your home

Want to save money by refinancing your home loan? Well Money can help. Explore your options here.

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