Optimize Your Home Loan: FAQs for Smart Refinancing

If you're a homeowner who has been with the same bank for more than 3-4 years and your current bank isn't offering competitive interest rates for your next refix, you might be wondering if refinancing your home loan to another bank is a good idea. The answer is likely a resounding "yes". Refinancing can offer more than just a cheaper interest rate and cashback. It's an opportunity to optimize your loan structure, especially if you have multiple properties with the same bank. In this article, we'll delve into the three most commonly asked questions when it comes to home loan refinancing, as outlined in this artical.

1. Will My Loan Term Be Extended When Refinancing? 

• Generally, it's not recommended to extend the loan term when refinancing unless there are specific reasons, such as serviceability issues or maximizing cash flow for investment properties. 
• Extending the loan term doesn't necessarily mean paying more interest. Most banks allow extra loan repayments during the fixed term and when the loan is floating, which shortens the total loan term and reduces interest fees. 

2. Should I Refinance During My Interest-Only Term? 

• The decision depends on whether the interest-only term aligns with your current financial situation and needs. 
• If it does, you can request a similar term or even extend the interest-only term with the new bank. 
• If your current income doesn't meet the new bank's serviceability requirements for interest-only terms, it's advisable to wait for a later date to refinance. 

3. Why Can't I Get a Guaranteed Lowest Interest Rate? 

• Only Kiwibank allows interest rate locking before your refinance loan offer becomes unconditional. 
• Interest rates can change without notice, and it usually takes 1.5 to 2 weeks from application submission to rate lock. 
• Predicting the lowest interest rate at the time of application submission is challenging. 

Refinancing your home loan is a strategic financial move that can offer various benefits, from lower interest rates to improved loan structures. It's important to consider the specific circumstances and your long-term financial goals before making a decision. While there are some challenges in guaranteeing the lowest interest rate due to market fluctuations, a well-planned refinancing process can lead to substantial savings and financial security. 

If you have more questions or need a no-obligation home loan review, don't hesitate to get in touch with your financial advisor. Lastly, stay tuned for more information on Westpac's new short-form refinance process, which may simplify the refinancing journey with reduced document verification requirements. Your financial advisor will be sharing more details in an upcoming video. 

Remember, the key to a successful home loan refinance is careful consideration of your unique situation and guidance from a trusted financial professional. 

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.