Some homeowners don’t give much thought to their mortgage once it’s been approved. Aside from making regular repayments and checking the bank statement every month, they simply adopt a “set and forget” attitude when it comes to their home loan. However, a regular review of the home loan and financial situation could uncover opportunities to pay back the mortgage much sooner. And knowing when to refinance or refix is an important part of that process.

The difference between refinancing and refixing

Refinancing means transferring your home loan from one lender to another, essentially paying off your existing home loan and taking out a new one with a different lender. Homeowners who choose to refinance usually do this to get a more competitive home loan interest rate, to shorten their loan term and pay back the mortgage sooner, or to access the equity in their property.

Refixing means locking in an interest rate for a new term when an existing fixed rate term expires. At the end of your fixed rate term, your lender will set a new rate for you and, unless you make any changes, you may be locked into a new fixed rate contract. This is your opportunity to take advantage of changes in the market and lock-in a better fixed interest rate. 

Why refinance or refix

Just as interest rates change over time, so too can your financial and personal situation. A recent promotion, a new baby, even retirement can mean the home loan structure initially set up is no longer fit for purpose for your current situation. 

When this happens, you may start thinking about changing your home loan structure – refinancing or refixing to secure a more competitive interest rate, take advantage of current home loan deals, or use the equity in your home to finance a renovation project or cover a large expense.

When to refinance or refix

Most homeowners typically only think about refinancing or refixing when their current fixed term interest rate is nearing the end. And while you don’t necessarily have to wait until the end of your fixed term contract to refinance your mortgage, most lenders charge a break fee to end a fixed term early, and that amount often offsets any potential savings.

The best time to think about refinancing or refixing is when your personal or financial situation changes in a way that impacts your income and expenses. For example, if your income increases or decreases significantly, if you are selling the property, if there has been a change in your household, such as a new baby or a recent divorce, or if you are renovating your home and need to finance the cost of the upgrades. 

What’s next

Before choosing to refinance or refix, it’s always worthwhile having your mortgage adviser go over your finances with you to help you make an informed decision. Refinancing and refixing come with some costs and bad choices can impact your future finances.  

To get advice about the best option for your personal and financial situation, and to help you determine whether or not refinancing or refixing is right for you, get in touch with a Mortgage Express branded mortgage adviser today.