HOME > BLOG > Refinancing > Have you had your mortgage for over four years?

According to RP Data, Australian mortgage holders update their home loan every 4½ years. So, if you’ve had your mortgage for over four years, it may be time for a review.

The main reason borrowers refinance is to get a better deal on their home loan. But what exactly does a better deal mean?

The type of loan that’s best for you will depend on what goals you have. Borrowers may have different goals when it comes to paying off their home loan. You may want to get out of debt as soon as possible and aim to put every extra dollar towards your repayments or you may prefer stability and sticking to a consistent budget. Either way, you will need to have a good idea of what you want from a home loan before you go out looking.

If you feel like you could be getting a better deal on your home loan, consider the following points before moving forward:

• Take a look at your situation and figure out what goals you have for the next few years. This will help you decide what type of loan will suit you best and whether it is the right time to refinance.

• If you refinanced now, would the loan be less than 80% of the value of the property? With property prices remaining stagnant over the past few years, there is a potential that the value may not have increased at all. If it is above 80% then mortgage insurance will be levied again which could run into thousands of dollars. This would usually negate any benefit of a lower interest rate.

• Before switching lenders, make sure you compare the two loans carefully. Calculate the annual saving in interest on the new rate. Deduct the changeover costs in year 1 and any ongoing fees in subsequent years. Be realistic about how much you will actually save in year one and ongoing to ensure that there is sufficient benefit to justify it.

• How well does your current lender treat you? Good customer service can make a huge difference to your lending experience and is one reason why some borrowers decide to switch lenders. If your current lender has great customer service, but not a competitive home loan, it may be worth speaking with them about decreasing the interest rate. 

• Do you really need to refinance? Despite what the statistics say, if you find that your home loan is still competitive, still offers the right amount of flexibility and/or stability and your lender provides great customer service, don’t change! Some people find that sticking with the one lender and working hard to pay it off as quickly as possible is a better strategy than switching loans every few years, when the changeover costs can add up .If you are looking to switch lenders just for the sake of change and you can’t see any real benefit, then it could end up costing you.