Refinance Your Home Loan – Strategies for Maximising Returns

With the RBA’s decision to reduce interest rates for the first time since November 2020, there’s never been a better time to look at your home loan and make sure you have the best deal!

Regularly reviewing your mortgage is key to ensuring you secure the best rates and loan terms. By staying proactive, you can unlock significant financial benefits, whether it’s refinancing for better repayments, increasing your borrowing capacity, boosting your buying power, or maximising tax advantages. A strong strategy in place can help you take advantage of your home loan refinance and help you reach your financial goals faster.

Choosing the Right Refinancing Strategy

Your strategy determines how you use your home loan, whether it’s purchasing your next property, funding renovations, freeing up cash, or consolidating debt. The right loan structure is essential to align with your financial goals and maximise your benefits.

For example, if you are refinancing your current home, you might be trying to reduce your monthly repayments to keep a bit of extra cash in your pocket, or you may simply be looking to save on as much interest as possible. Regardless of your desired outcome, there will be a specific structure of your loan, including your repayment term, rates, and features like an offset account or redraw facility, that will best suit your needs and situation.

Unlock a Lower Rate & Reduce Your Mortgage Payments

Customers often look at their home loan interest rate wanting to find ways they can save over the life of their loan term. With refinancing, you can lower your interest rate without adding additional time to your loan.

for example, if you’re 5 years into a 30-year mortgage, you can refinance into a new 25-year loan instead of restarting at 30 years. This allows you to save on interest while staying on track to pay off your home as planned.

A home loan refinance can also help you maximise your returns by freeing up cash. For example, when you refinance your home loan it can provide the opportunity to reduce your repayments, this means more money in your pocket to use on your life.

Our refinance calculator can help you compare your current home loan and give you a better idea of your potential savings. Head to our home loan calculator to learn more.

Increased Capacity & Buying Power

Refinancing your home loan can be a powerful tool to enhance your financial capacity and increase your buying power. As you pay down your mortgage, you build equity in your property, which can be leveraged when you refinance. By refinancing, you can access this accumulated equity, unlocking extra funds that can be used for a variety of purposes.

Lower interest rates have increased borrowing power, allowing banks to lend more as lower repayments make larger loans more affordable. This creates a great opportunity for homeowners who previously had limited borrowing capacity.

If your goal is to expand your investment portfolio, the additional funds from refinancing can be put towards purchasing another property. This in addition to increased borrowing power allows you to capitalise on opportunities in the market, whether it’s upgrading your current home or purchasing an investment property.

Benefits of Refinancing Investment Property

Refinancing your investment property can boost cash flow by securing a lower interest rate. A reduced rate means lower repayments, freeing up funds for renovations for example or other financial goals you have set for yourself. Our Head of Home Loans, Bill Robb, who has 26 years of industry experience, shared an example of his team’s expertise when it comes to refinancing.

Recently our team helped refinance a customer whose interest rate was 6.7% for their investment property. With refinancing they were to get $50k cash out towards some home renovations on the property and a new interest rate of 6.24% This not only provided a better interest rate, but also gave them the funds to freshen up the home and help increase the value.

Navigating Lenders Policies for Home Loan Refinance

Lenders consider several key factors when assessing your application for your home loan refinance. While many aspects come into play, lenders primarily focus on three main areas: your credit profile, financial capacity, and the current value of your property. These elements help determine your eligibility and the terms you may qualify for. To ensure a smooth refinancing process, below is a quick summary of the three main considerations:

• Credit Profile: Your credit score plays a crucial role in refinancing, as it can unlock better rates and more favourable loan terms for your home loan. The higher your credit score, the more options you’ll have, as lenders view you as a lower-risk borrower compared to those with lower scores. If you’re curious about your credit score and how it’s calculated, Moneysmart offers a fantastic resource with their article “Credit Scores and Credit Reports”.
• Financial Capacity: Lenders assess your capacity by subtracting your expenses and financial liabilities from your income, to understand your financial stability. Lenders then use this remaining amount to determine your ability to repay your new loan.
• Property Value: As your property serves as security, lenders will assess the value compared to the amount you’re borrowing, to determine the risk associated with your new loan. This calculation is called the loan to value ratio. Lenders use this ratio to ensure the loan is within their acceptable limits, minimising their risk.

If you’d like to know more about your property’s value, reach out to our team who as part of our process can provide a free property valuation, so you know exactly what options are available to you.

Maximise Your Returns Now!

Let us assist you with your home loan refinance to maximise your returns today. Enquire now to get started!