When should you refinance your investment property loan?

Is now a good time to refinance your Neutral Bay investment property?

Possibly. Refinancing your investment property loan can make a significant difference to the length of time it takes to pay off your loans, and many Neutral Bay investors are choosing to make this update while interest rates are low and the property market is performing strongly.

However, you need to know if the time is right for you. Read on for some general points about why you might consider refinancing an investment loan in 2022. But of course, please talk to a qualified financial adviser or your accountant to discuss your mortgage further.

Refinance to combat rising interest rates:

If you have been following the real estate market in recent months, you will know that interest rates are at an all-time low right now, but look set to rise at some point in the near future, banks have already started increasing their rates. If you can refinance to a lower interest or a fixed-rate loan, now is probably the time to do it. Refinancing can reduce the cost of your mortgage payments significantly, so it’s definitely worth investigating at this point in time.

To pay off your loan more quickly.

The quicker you pay off your loan, the less interest you pay, even on a fixed-rate loan. If you can refinance but still make higher repayments, this can be a smart move to reduce the number of years you spend with a mortgage hanging over your head.

To get a better deal.

If you haven’t examined your loan and shopped around for better options recently, why not do it now? There is no need to stick with a less rewarding loan when you can refinance. Yes, there is some paperwork and time involved, but it can pay off, and you may even find your current lender is willing to offer you a lower rate in order to keep your business.

To release equity.

Equity is the difference between the amount you owe on your property and what it is worth. Releasing your equity is sometimes a smart option if you need to renovate or expand your property portfolio.

Be cautious with your equity, though. Talk to an accountant or broker about how best to use it; for example accessing equity to spend on a holiday is money lost, but using equity to renovate can increase the value of your home so you actually profit from the move.

To consolidate your debt.

Refinancing can be an opportunity to roll your different debts into one. There are pros and cons to consolidating debt, but get it right, and you can minimise repayments and, more importantly, reduce the interest paid over the life of the debt. Home loan rates are usually lower than credit card or personal loan rates, so refinancing may work well for you if you owe money across a number of different loans.

To opt-out of mortgage insurance.

Depending on how much of your loan you have repaid, you might consider refinancing to drop your loan insurance. In most cases, you will need to have repaid 80% or more of your loan before this is an option. However, if you are confident that you can live without mortgage insurance, you may end up with fewer fees to pay on the remainder of your loan.

Talk to us

Do you have an investment property and want to talk to us about our property management services or the option of putting it on the market? We also have plenty of recommendations for mortgage brokers. Get in touch with us today!