Five reasons to refinance your home loan
Many people treat their home loan as a set-and-forget, riding out whatever the original loan terms and prevailing interest rates dish up. They may be doing themselves a disservice, as there are several ways in which borrowers can benefit from refinancing their mortgage.
1. Find a lower interest rate
Whether interest rates are rising or falling, in a competitive mortgage market you may be able to refinance your mortgage at a lower interest rate. The benefits are that you can then…
2. Reduce your home loan repayments
For a given loan term the lower the interest rate the lower your repayments. This then frees up some of your income for other purposes. Or you can…
3. Shorten the term of your loan
If you maintain your current repayments with a lower interest rate loan, you’ll pay it off sooner and save a lot on interest.
4. Switch from a fixed to a variable rate mortgage (or vice versa)
A fixed rate home loan can help you lock in an interest rate for several years into the future. This can provide some protection against rising interest rates. Conversely, when interest rates are falling, a variable rate loan is the better way to go. Be aware, however, that even the experts often get it wrong when it comes to predicting the direction of future interest rates.
5. Consolidate debt or access equity
If your home has increased in value then refinancing may allow you to access some of the greater equity you have in your home. This may allow you to pay off higher interest debt, such as credit cards, take a holiday, or pay for renovations.
While refinancing a home loan can be a winning strategy that’s not automatically the case. There will likely be costs involved in both paying off the existing loan and in establishing the new loan. If the difference in interest rates between the old and new loans is small, it may be hard to gain a benefit.
And take care when refinancing for debt consolidation or to free up equity. If you promptly max-out the credit card you’ve just paid off, you could be digging a deeper debt hole for yourself.
To find out if you’re getting the best deal from your mortgage, talk to a qualified professional.
Free Loan Review
Receive a customised review to improve your savings and reduce the amount you are paying.
Related Blog Articles
Access to home guarantee scheme expanded to friends and siblings
From 1 July 2023, access to the Government’s Home Guarantee Scheme will be expanded to joint applications from “friends, siblings, and other family members” and to those who have not owned a home for at least 10 years. – Access to home guarantee scheme expanded to friends and siblings.
The impact of natural disasters on property values and insurance
This article provides insight into the impact that natural disasters can have on property values and home insurance premiums. It also includes some important tips for home purchasers, when looking to buy a property. – The impact of natural disasters on property values and insurance.
Authorised Credit Representative 383415 of IFBA Pty Ltd. Australian Credit Licence Number 383415.