When you fix your home loan, you enter into a contract agreement where your interest rates and repayments are locked in for a certain amount of time.
If you decide on a fixed rate loan, is it possible to refinance? And if you can, would you be better off breaking your loan, or waiting for your fixed rate term to end? In this current market, should you look for a new variable home loan instead?
Should I refinance my fixed rate loan?
Refinancing a fixed rate loan should be a well-thought out and considered decision. You should take into account all possibilities, including the expense of compensation you will have to pay your lender. While the most popular reason to refinance a home loan is to get a better interest rate, it may not be the best option for every financial circumstance.
Before you take the leap to refinance, it is best to consider how much you will actually save from refinancing, as well as how much it will cost to break your fixed term agreement. If the expense to break is greater than how much you might save, it may be best to keep with your original loan agreement.
What if I am making interest only payments?
Making interest only payments on your fixed rate home loan means that if you choose to refinance and break your loan agreement, you will lose your current fixed interest rate. In addition, refinancing may mean that an interest-only payment scheme may not be the best option for you.
Take a look at our refinance calculator for a better understanding of how refinancing may affect your financial situation.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.
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