If you’re a home owner with your first mortgage, congratulations! It’s wonderful to have stepped onto the property ladder. But sometimes new home buyers may be under the impression that once you sign on the dotted line for your home loan, it’s locked in, and there’s nothing you can do to change it.

But really nothing could be further from the truth – especially when you utilise refinancing.

Refinancing is a fantastic tool that most borrowers have at their fingertips. Refinancing can help you to ensure that you have the very best home loan to suit you right now. And it allows for flexibility should your circumstances change or should you just want to look for a better deal.

But we often get questions from borrowers who are worried about how often they should (or can) refinance their home loans. They wonder if there are any limits, or any issues with refinancing often.

So, how often can you refinance your home loan? Let’s dive in!

What is home loan refinancing?

When you refinance you’re essentially moving your existing home loan to an entirely new product. This may be a different home loan product from the same lender, or you may change lenders altogether.

The process itself is very straightforward. Once you’ve found the loan that suits you, you simply need to fill in your application forms, and the lender will take it from there.

Refinancing is hugely popular among Australians. According to the Australian Bureau of Statistics, the value of external refinancing in June 2023 (in seasonally adjusted terms) was $20.2 billion, 12.6% higher than the previous year.

Reasons to refinance

There are many reasons why a borrower may choose to refinance their home loan. Some may be due to personal circumstances and others to external factors such as the current financial climate. These could include:

• A change in marital status
• A change in work/income – e.g., a promotion, a drop in weekly hours, retirement
• A change in debt status – e.g., paid off a personal loan, taking on a new car loan
• To consolidate other debts
• Dissatisfaction with your current lender
• Planning a renovation or holiday
• Interest rate rises
• Cost of living pressures
• Increased family expenses
• Needing different/additional loan features, e.g., offset account

Potential benefits of refinancing

There are many potential benefits to refinancing. Most borrowers choose to refinance with the end goal of finding a product that suits their situation better and provides them with a better deal overall. And refinancing can certainly get that for you.

Refinancing can also result in:

• A lower interest rate
• A shortened loan term
• A switch between fixed and variable rates
• The addition of new loan features, such as flexible repayment options or redraw facilities
• The reduction of monthly repayments after consolidating debts
• Being able to access equity in the home

How often can you refinance your home loan?

With all those potential benefits it’s easy to think that refinancing is always the best choice. But are there limits? How soon and how often can you refinance your home loan?

Generally, borrowers are entitled to refinance their mortgages whenever they choose. But refinancing comes with its own risks and costs, so these should be carefully considered before deciding to make the move.

Risks and costs of refinancing

Fees

The fees associated with switching loans or lenders may affect how often you choose to refinance your home loan. Depending on the lender refinancing costs can often include:

• Break fee
• Discharge settlement fee – lender legal fees may be included or charged separately
• Loan application/establishment fees
• Property valuation fee
• LMI

You’ll want to weigh these up against your potential savings with a new loan product.

Time

The refinancing process can also take anywhere from a few days to a few months to complete. So you’ll want to keep this in mind as well when making your decision. You may want to find a lender that is known to settle more quickly. Or simply be prepared for the process to take a bit of time.

LMI

You may also want to wait until you have at least 20% equity in your home before refinancing. This will typically help you to avoid paying Lenders Mortgage Insurance (LMI). If you do have to pay LMI, you’ll need to factor this into the overall cost of your refinancing as well.

Finding the right timing

Everyone’s circumstances are different. And your particular circumstances will impact how soon and how often you choose to refinance your home loan. The main goal is to ensure the benefits and savings will outweigh the costs.

For some, it would be appropriate to switch lenders or products after a year, while others may be wiser to wait a few years. Generally, Lending Loop recommends borrowers conduct regular home loan health checks every few years to ensure their existing home loan still suits their needs.

If you’re not sure when is the right time for refinancing, or if you need guidance through the refinancing process, the Lending Loop team can help you to make an informed decision.

The refinancing process

The refinancing process is very similar to the process you undertook to take out your existing home loan.

1. Research refinancing yourself or talk to a professional.
2. Conduct a home loan health check and consider your current circumstances, including income, home equity and financial goals.
3. Compare home loans and lenders, taking into account interest rates, terms, features and the costs of refinancing.
4. Apply for your new home loan – it will help to have all documents ready to go.
5. Close your old home loan.

Get in touch!

Ready to consider refinancing? Head to our website for more information or book an appointment with one of our home loan experts today. We can help you to negotiate a better deal from your existing lender or hunt around for the very best home loan to suit your needs.