Extending your loan term when you refinance introduces additional interest costs that may outweigh the savings you can benefit from in your new loan.

As Adam and Rachel’s example suggests; by extending the loan term by 5 years they will incur 5 years more of interest payments and increase the total amount of years they are paying interest, to 35 years.

If you are unable to negotiate the same loan term as your current one but would still like to refinance your home loan to a more competitive interest rate you can consider making higher repayments which will enable you to pay down your home loan in the same amount of years as your initial loan term or sooner.

Your mortgage broker can assist you to calculate the repayment amount needed to implement this strategy.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.