Refinancing every 3 years - good or bad

Hi

i’d like some advice on whether refinancing every 3 years a good idea? My aim is to slightly pay off debt, then also refinance for another 30 years so that my borrowing capacity keeps increasing.

any downsides you can see to this?

 

im considering this as a future strategy also, I would say it depends on the size of the portfolio debt. For example my principal is payment is shaving off around 2% roughly per year. If you have 2m of debt your shaving off $200k every 5yrs, 5m debt shaves off $500k over 5. Which essentially is Freeing up another property

 

its good.

 

Assume my servicability is getting better because i’m paging 30k extra every year on a 1.2 mil loan. Also i would be refinancing to a cheaper organisation ( currently with CBA) and my property has definitely grown in value

 

Generally your serviceability will be constantly improving as you will be reducing minimum repayments by extending loan terms.

You can use it as an opportunity to borrow more - but this is an incidental bonus.

Certainly use it to try to get lower rates too.

 

Yes generally it is a good idea to try to borrow whenever you can at least it was until 5 years ago,but now you may find you can borrow less so you need to be careful if you close down loans. I would say it is good if you refinance after 5 or 6 years that is generally the time span most investments need to prove themselves as solid or dubious. And not too long to wait to access some profits. Rather than using capital to pay down loans it is better to have a buffer of funds offsetting the loan which can be used for investing for high growth or even growing yields. Dividends of 8% (income helps serviceability) are much better, gives you a 400% better return than the 2% saved with CG should get a 700%. Better again invest for growth and a 1500 + ROC is possible ( $15 returned, instead of $1 saved, for every for ever $50 of debt). When overweight rebalance and reduce loan balance with with cash. With growth you can pay cash for properties, property is a way of extracting profits while reducing tax. Paying cash gives you the advantage of buying at discount with out conditions and puts you in a box seat. You don't want to be reliant on loan approval for purchasing. Rather than pay 200k of a loan over 5 years you could just spent 250k on a property after 6 years and get 10k extra income. while decreasing your LVR if needed. There is also great advantage and flexibility with unencumbered property, another reason why it is not a good idea to pay down loans. If you want extra leverage, and don't want to die wondering about what could have been, you can take out an equity loan against your shares or take out deffered purchase plans with put options to mitigate risk for 100% loans for share market exposure.

 

Anyone considered refinancing to get the deals from the banks ?

e.g. st George are giving 4K for first loan and 2K thereafter to refi, anyone done the maths does this make sense to do?

 

Extending the term by 3 years isn't going to have a massive impact on your overall borrowing capacity - unless the loan amount is huge and your capacity is border line.

There's costs involved in refinancing - generally budget around $1k.

Having said that - it's a good idea to keep an eye on your loan to ensure it remains suitable and competitive.

Also - hit up your current lender for a discount before refinancing to another.

Cheers

Jamie

 

Do you reckon then refinancing every 5 years is better than 3 Jamie? I have 3 loans, 215k, 220k and 575k

 

You should reassess at the time of application for the next purchase.
There may be not point in refinancing if not needed.
but there could be I guess - you never know when you will lose your job or may never be able to borrow again.

 

No - there's no specific timeframe. Whatever works for the borrower.

Cheers

Jamie