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Refinancing Or A New Mortgage? What’s Better?

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Refinancing Or A New Mortgage? What’s Better?

Refinancing a home loan is becoming a very viable option for homeowners seeking an upgrade or renovation to an existing home, or for those who are looking to purchase an investment property.

The decision for many is between refinancing an existing loan, or procuring a new mortgage entirely. Refinancing provides you with a sense of ease, comfort, and peace of mind - that is, if you’re happy with your current mortgage and the way it’s being handled.

Increasing an existing mortgage means you have a prior awareness of how the lender operates, how you’ve been keeping up with it, and also the benefit of not having to go through the oftentimes arduous process of beginning a mortgage again. You’ve got an existing agent who you’ve probably got some form of prior rapport with, which is certainly invaluable.


The following are some key points that you will definitely want to be studied up on prior to making your decision in regards to refinancing or a new mortgage. With an intimate knowledge of your current loan agreement, you’re arming yourself with the information needed to make the right decision for you:

  • the total amount you will be paying back given your current rate
  • your current interest rate
  • your comparison rate (the real rate of interest after certain fees and charges are factored in)
  • the annual payments you’re making on your current home loan
  • what’s been agreed upon in regards to a rise in interest rate

Often, your agent will be able to provide you with an entire rundown of all this information and then some, so don’t be afraid to ask.

Once equipped with this information, the next thing to do would be to assess the market - compare your current loan to what’s being offered by equivalent lending parties.

Beyond the simple comparisons (how much it is, interest rates, etc), you should also be looking out for additional features or offers that may be offered to new clients such as a redraw facility: a feature that allows you to put extra payments into your home loan to get it paid off quicker, while allowing you the financial flexibility of being able to withdraw those extra amounts if you so choose.

Or, in other cases, they might offer an offset account - this functions similarly to a redraw facility, but with some key differences: an offset account exists in tandem with your home loan. When you hold money in your offset account as you would in a regular account, the big benefit is that amount will be subtracted from your existing interest.

To put it simply:

Your loan is $300,000.

You deposit $10,000 into your offset account.

Now you get charged interest on $290,000, not the full $300k.

You could potentially save tens of thousands over the years!

So, in essence, this decision comes down entirely to your own preexisting personal circumstances and home loan.

If you’re unhappy with your current deal, it may be worth speaking to your lender prior to making a switch, as making them aware of the stakes may encourage them to be a little more forthcoming with the offers or deals they can make.

If they cannot do any better, and you know there are better offers out there - it might be time to consider a new mortgage. The ease of just refinancing with your existing lender is very appealing, but don’t let that be the only factor affecting your decision.

A little bit of extra work can save you thousands down the line. Good luck!