Refinance Home Loans

With interest rates at a 20-month low following the RBA's December 2011 rate cut, it could be time to investigate refinancing your home loan.

Why would you want to go through all that red tape again? The answer is simple, to save money on your mortgage. The following should help you answer your burning questions about whether or not this course of action is right for you.

What is a refinancing loan?

Refinancing your home loan is when you either take out a new home loan with a new lender, or negotiate a better loan with your existing financial institution.

The point of doing so is almost always to secure a lower rate of interest that will save you money on your monthly repayments and possibly reduce the life of your loan.

It's worthwhile investigating the possibilities of refinancing if your situation has changed such as you have a new/another baby, you want to buy a bigger property or you feel you are locked into interest rates above market value.

Many people also choose to refinance in order to consolidate credit card and personal loan debt, but you should be aware that doing so might mean you will be paying off smaller debts for up to 25 years.

How do I decide if I need to refinance?

Regardless of your situation, it's advisable to perform an annual health check on your mortgage to make sure you're not lumbered with an outdated, overly expensive product. Would you prefer to be on a fixed or variable interest rate, or a mixture of both? Ask yourself if your mortgage has all the features you need such as an offset account and redraw facilities. And,if you don't need extra accounts and features, are you paying through the nose for services you don't use?

When can you get a refinance loan and how?

With the government ban on exit fees now in full swing, competition between lenders for your refinancing business is stiff and it's relatively simple to negotiate yourself into an improved financial position.

Once you've decided if refinancing is right for your circumstances, use iSelect's home loan comparison website to work out how much you could save if you could wrangle a 0.25% reduction on your interest rate. If you need a little extra advice, visit the government's "Understanding Money" website at understandingmoney.gov.au.

What are the advantages of refinancing?

Some of the benefits apart from lower interest rates that lenders may offer you - or that you can ask for - include waiving or reducing the application fee, reduced annual fees, and even bonuses of up to $1000 to help cover the costs associated with changing loans or lenders.

Disadvantages:

There are likely to be a lot of extra fees and charges associated with the changeover.

Find the right refinance home loan for you at iSelect today