Knowing when to refinance your home loan

In the past, most people who took out a mortgage doggedly continued with it until they had paid it off.

These days, people refinance their mortgage much more frequently.

The average duration of a home loan in Australia is now just four-five years.

Here we look at some of the reasons people in Australia refinance their home loan.

Of course, the most common reason for people to refinance their mortgage is to get a better deal.

When you refinance your home loan, you need to consider the fees and charges, as well as the interest rate.

You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you'll be better off in the long run after taking into account all costs.

Many people only discover the full details about their mortgage when it's too late.

They try to do something and get told by their lender that either they can't do it, or they will incur a hefty charge if they do.

An example is a redraw facility - the ability to pay extra money into a mortgage and then redraw it later.

This feature is not possible with certain loans, so many people refinance their mortgage to give themselves this sort of increased flexibility.

If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses.

Over recent years in the property market, houses have appreciated at a significant rate.

For example, a home you bought for $300,000 five years ago might now be worth $500,000.

You can utilise that extra $200,000 in equity to purchase another property, for example.

Some people find they have borrowed more than they can comfortably repay, and they're in danger of defaulting.

There's no shame in that. But don't suffer in silence.

If you're having trouble making your mortgage repayments, talk to your mortgage broker about refinancing your home loan to make it more manageable.