Invest
To refinance or not: What investors need to consider
Property investors looking to refinance in 2019 should first consider the associated costs and their loan terms to ensure the move is worthwhile, says Nicole Cannon of mortgage broking firm Pink Finance.

To refinance or not: What investors need to consider
Property investors looking to refinance in 2019 should first consider the associated costs and their loan terms to ensure the move is worthwhile, says Nicole Cannon of mortgage broking firm Pink Finance.

In an environment of falling property prices and tightened lending standards, choosing to refinance may not be the best decision for some. Recent data from CoreLogic shows the fall in home values across Sydney and Melbourne has continued to accelerate the slump in the Australian housing market.
According to CoreLogic’s latest Hedonic Home Value Index, property prices dropped by 0.7 per cent nationwide in November, the weakest month-on-month change since the global financial crisis (GFC), with national values now down 4.1 per cent year-on-year.
Homeowners and investors who bought at the peak of the boom may have less-than-stellar refinancing options if valuations of their properties come back lower than expected or below the purchase price.
In order for refinancing to be worthwhile, investors must consider a number of options.
The costs
According to Ms Cannon, refinancing comes with exit fees, entry fees and government fees. Those looking for a new loan need to make sure that they will not lose money in the process.
“There are a few lenders that offer refinance rebates, which negates these costs but this should be considered to see the benefit,” she said. “Do a mortgage switching benefit calculation. We provide to our clients a calculation which shows the benefit of the refinance taking into consideration rate and fees.
“This shows beyond doubt the benefit, if any, to refinance.”
Loan term
Investors should also consider how far into their loans they currently are. Refinancing to a longer loan term may result in lower payments in the short term, but it may cost more in long term.
“Previously, refinancing often took the loan back to the original loan term, which, if you don’t use the reduced payment as a way to pay down the loan quickly, means you pay more interest over the life of the loan,” she said. “I encourage people to keep the loan term the same, and when consolidating credit cards and personal loans, to do it over a 10-year period instead of 20 or 25 years.”
Tax implications
When considering refinancing, investors must also consider how their taxes will be affected. Ms Cannon urges people to remember that they might not always be able to claim on interest.
“Be mindful, that if you increase your investment loan, and it is not for any capital improvements on the investment property, you are unable to claim the extra or increased interest,” she said.
“Once you have paid down the debt, you are unable to claim interest greater than the balance.”

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more