Refinancing Your Home Loan: Is It Right for You, right now?

In today’s financial climate, many homeowners are considering refinancing to improve their mortgage rate.

At Brisbane Home Loans, we’re seeing increased interest in refinancing due to ongoing pressure of interest rates and better loan features.

The RBA has lowered the cash rate by 0.25% on Tuesday 18 February 2025 and almost all Lenders have passed this on. It is a good idea to check now and see what your Lender is doing and what you will be paying once the rate cut has been applied to your interest rate.

Refinancing can be a good move, but is it a good move for you, right now.  We would encourage you to check out your new rate post rate cut and contact us with the rate.  We will tell you immediately if it is sharp and you do not need to take action.  The last thing we want for our clients is to unnecessarily suggest a refinance that is not required.

Anyway, let’s look at the pros, cons, and important factors to help you decide.

The Upsides

Refinancing can offer several key advantages:

• Savings: Secure a lower interest rate and save money over the life of your loan.
• New Features: Access beneficial loan features like offset accounts and redraw facilities.
• Debt Consolidation: Simplify finances by rolling high-interest debts into your mortgage.
• Unlock Equity: Access funds for renovations or investments if your property value has increased.
• Fixed Rate Security: Switch to a fixed rate for protection against potential rate increases.

The Potential Drawbacks

It’s important to consider the downsides:

• Refinancing Costs: Fees for switching loans can include exit, application, valuation, and legal costs. Make sure the savings outweigh the upfront costs.
• Longer Loan Terms: Extending your loan term might lower monthly payments but increase overall interest paid.
• Lenders Mortgage Insurance (LMI): You may need to pay LMI again if your LVR is over 80%.
• Honeymoon Rates: Be wary of introductory rates that increase later.

What to Watch Out For

Keep these potential traps in mind:

• Break Costs: Breaking a fixed-rate loan early can incur significant costs.
• Hidden Fees: Scrutinise the fee structure for annual, transaction, or early repayment penalties.
• Comparison Rate: Focus on the comparison rate for a more accurate picture of the loan’s true cost.
• Cross-Collateralisation: Be cautious of using multiple properties as security.
• Bundled Products: Ensure bundled products like credit cards or insurance are genuinely beneficial.

Making the Right Choice

Refinancing can be a powerful tool when used wisely. Consider these steps:

1. Assess: Understand your current loan terms and exit fees.
2. Define: Determine your goals (lower repayments, access equity, consolidate debt).
3. Calculate: Compare potential savings against refinancing costs.
4. Shop Around: Compare offers from multiple lenders (Brisbane Home Loans can help!).
5. Read: Understand all terms and conditions.
6. Consider: Factor in future life changes.

The Bottom Line

Refinancing offers benefits like lower repayments and financial flexibility but isn’t a one-size-fits-all solution. An expert broker can weigh the pros and cons, ensuring an informed decision aligned with your goals.

At Brisbane Home Loans, we’re here to guide you through the process with personalised advice, ensuring you make the most of your refinancing opportunity.  Send us your outstanding loan balance and new interest rate post the rate cut here and we will let you know our thoughts. (07) 3889 9250