Should you refinance your investment loan?

An investment property loan refinance involves closing your existing loan and replacing it with a new one, often from another lender. When done properly, refinancing your investment loan can be a great way to save money and maximise your investment returns. 

Like any investment strategy, you need to consider all the potential risks involved. There’s a right time and place for refinancing your investment loan. Before you delve right in, you need to review your investment carefully. 

When is a good time to refinance an investment loan? 

The best time to refinance your investment loan is when your current loan no longer meets your needs. You need an investment loan that can match your financial goals, and sometimes, what may seem like a good deal at the moment can become a burden as time goes on. Here are a few signs it’s an ideal time to refinance your investment loan: 

Interest rates are significantly lower  

Interest rates change over time and could be much lower now than when you first took out your investment property loan. Study the current interest rates and market trends to see if you can get a better deal when you refinance. Look at what interest rates lenders are offering, as well as the new loan terms and conditions available. It can also be a good idea to check with your existing lender to see if they can offer you a better deal before you refinance. 

By refinancing your investment property loan, you could save heaps on interest. Crunch the numbers yourself by using a refinance calculator; this online tool can help you figure out how much you could potentially save when you refinance. 

When refinancing, you may have to pay break fees, exit fees, and the like. Take those additional costs into consideration when weighing the pros and cons. If interest rates have only slightly changed, it may not be worth refinancing in the long run.

You want to take advantage of your property’s equity 

The equity on your investment property pertains to the percentage of the property you currently own. It’s the difference between your remaining loan balance and the value of the property. As the property value increases and you pay off more of your loan, you build more equity. 

You can use your refinance to access your investment property’s equity. In some cases, you could access up to 80% of the property’s total value which you can use to fund other investment ventures or improve the value of your current property through renovations. 

Calculate your investment property’s equity using the online equity calculator. Before refinancing, figure out how much equity you have and see whether it’s enough to fund your next investment project. 

You want to change lenders 

Switching to a lender that fits your needs better can make loan repayments easier and more convenient. You won’t truly know how a lender operates until you’ve taken out a loan with them. Your lender or their representatives may take too long to answer queries or resolve issues. Or you don’t want to visit the lender in person every time you’re having issues. If after a few years, you find that they don’t offer the type of services you need, it may be time to find a lender that’s more compatible with your needs.  

Factors to consider for an investment loan refinance 

A lot of preparation goes into refinancing an investment property loan. To ensure a successful loan refinance, you need to think about your investment carefully. If you’re thinking of refinancing, consider the following: 

Additional costs 

Always look at the costs involved in refinancing your investment property loan. You have to consider break fees or discharge fees when you exit your current loan. You’ll also have to pay for valuation fees, application fees, establishment fees, and other associated expenses when taking out an investment loan refinance from a new lender.

To save on these additional costs, look for a lender who offers minimal fees. Aside from the interest rates, check out the comparison rates to see the full cost of the loan and whether the fees are reasonable.

Market value 

Look at how your property’s market value is fairing. If house prices have risen since buying your investment property, you’ll likely have built up equity. However, if house prices have fallen, you may risk having negative equity. Get a free property report or suburb report to see market data, market comparisons, median prices, and more. 

Knowing the state of your investment will help you make an informed decision about whether refinancing is the right move. 

Investment strategy 

An investment loan refinance should help you with all aspects of your investment. Before taking out an investment loan refinance, ensure that this move aligns with your investment goals.  

It’s tempting to refinance your investment loan when interest rates are low but look at the bigger picture. Consider where you are with your current loan to see if switching lenders would be beneficial. Are you almost at the end of your loan term? Would the lower interest rate provide significant savings? How will switching lenders help you achieve your bottom line? Asking these questions can help you make an informed decision.

Finding a good investment loan refinance 

Once you’ve decided on refinancing your investment loan, it’s time to look for a refinance solution that suits your needs. Get in touch with our friendly lending specialists and they can help you find the perfect refinance option. If you’re ready to start your investment loan refinance journey, apply online today! 

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