How to Refinance Without Resetting Your Loan Term
One of the biggest misconceptions about refinancing is that you have to start a fresh 30-year loan term. This isn't true — and avoiding this trap can save you tens of thousands in interest.
The Problem
When you refinance to a new lender, the default is usually a new 30-year term. If you've been paying your current loan for 7 years, that means you've just added 7 years of interest back onto your total cost. Even if your new rate is lower, the extended term can wipe out the savings.
The Solution
Simply ask your broker (or tell us) to match your remaining term. If you have 23 years left, we set up your new loan for 23 years. Your repayments will be slightly higher than a 30-year term, but the total interest savings are substantial.
A Real Example
- Current loan: $650,000 at 6.8%, 23 years remaining
- Refinance option A: $650,000 at 6.1%, 30 years = save $82/month but pay $67,000 more in total interest
- Refinance option B: $650,000 at 6.1%, 23 years = save $18/month AND save $89,000 in total interest
The difference is staggering, yet most borrowers aren't shown option B.
What We Do Differently
At Sovereign Lending, we always model both scenarios and present the total cost comparison — not just the monthly repayment. Our goal is to minimise your total cost of borrowing, not just your monthly outgoing.
If you haven't reviewed your loan in the last 12 months, there's a strong chance we can find you a better deal. Get in touch for a free comparison.
