Refinancing Every Year, Can My Credit Score Survive?

k15866 on 27/02/2021 - 11:31

So in the spirit of getting the most value for money, I have been wondering whether it is possible to refinance on a yearly basis for ~$3-4k cashback (and in the current climate also getting a better rate). My broker has advised that at a yearly rate of refinancing, my credit score will not be able to handle this and I will eventually get auto rejected as my credit score will not have recovered from the last refinance.

Whilst I generally trust this mortgage broker, I know he has a little conflict of interest as he mentioned he only gets paid upon the anniversary date of the mortgage. Google information about credit score is vague so it's kinda hard to gauge how long I'd have to wait to ensure my credit score has returned to baseline. My CC is paid off consistently as are my mortgage repayments and am adding extra repayments roughly equal to regular repayments, but again can't really tell to what degree this can help my score.

Just wondering if anyone has any deeper understanding of how this works / if they've been able to achieve this?

PS. I'm on 100% variable and after fees would take about $1k of the cashback but still a net profit as far as I can tell. Thanks

Financial

Comments

  • dmbminaret on 27/02/2021 - 12:09
    +2

    I don't see how one enquiry per year will affect it adversely. Mine appears to have gone up with a recent home loan and 2 credit cards, but I was in the process of fixing up a pretty benign erroneous item and coming from discharged bankruptcy, so not much there to begin with.

  • tomleonhart on 27/02/2021 - 12:34
    +2

    Lender will look at your credit score which show your credit history and make their decision to lend based on that.

    Some will be happy to lend knowing that you refinance every year, some won't.

    • k15866 on 27/02/2021 - 12:52

      Yeah another risk I had in mind, but being stuck with the apps / internet banking of the banks I am looking at, is not an issue for me (they aren't Citibank level of bad). To be rejected when refinancing in the future, would be similar to not refinancing regularly. I would have an existing home loan with suboptimal rate.

  • kgree92 on 27/02/2021 - 12:42

    Interesting, would be interested in this also

  • dmbminaret on 27/02/2021 - 12:48

    Whilst I generally trust this mortgage broker, I know he has a little conflict of interest as he mentioned he only gets paid upon the anniversary date of the mortgage.

    Any reason you can't do it on 13th month? Then it's a pay day for everyone?

    • k15866 on 27/02/2021 - 12:53

      I offered this to him, he did not acknowledge it. So this sits in favour of him simply being honest.
      Having said that, perhaps he doesn't want me to constantly abuse this knowledge in some way I am getting him to do this year's work at the risk of losing last year's commission.

  • pharkurnell on 27/02/2021 - 13:10

    Ask a second mortgage broker for advice

  • serpserpserp on 27/02/2021 - 13:21
    +1

    The facts here are this. If you have strong serviceability of your loan and you are relatively young, stable employment, you won't have any problems at all with refinancing.

    The problem will be if your circumstances change, you move into an older age bracket, the loan you are servicing becomes one that certain banks don't want to take off (ie. gets too small). Then the hits to the credit score might be the excuse the banks need to not take your loan. Then if the merry-go-round stops and you are with some bank you don't like or hikes the fees/interest or whatever and you can't get out to another bank (unless you pay high fees) it might become a problem.

    • k15866 on 27/02/2021 - 13:46

      Yeh this was pretty much what I had figured, which I'd thought the risk of being stuck was not a big issue for me.
      Good point on the loan getting too small though. Made me realize there are not many years until my loan gets too small to meet the bank's usual minimum loan value (assuming i use my extra repayments to lower the loan amount)

      So the overall missed cashbacks is not actually that many and therefore might not be worth the potential hassle in a few years.The actual +$2.5k won't have that big an impact on the term of the loan if just used to offset, although my plan was to invest it in shares. Might go with refinancing every 2 years instead

      Probably a better move is to call my current bank and ask for a better rate

      • serpserpserp on 27/02/2021 - 13:50

        If bond yields keep escalating you might want think about locking in a fixed rate refi this year to get a best low rate you can for the next 3 or 4 years. If the last 2 months on the 10 year tenor has been any indication, cost of funds might begin to rise. But who knows have government interventions might stymie that.

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