As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and changing to another lender with a cheaper interest rate or a loan that better suits your needs.
Refinancing can also allow you to consolidate your debts or pay down your mortgage limit.
Another common reason borrowers look to refinance is so that they can access equity (the difference between the value of your property and your current mortgage). Generally funds are then used to make home renovations or to buy an investment property.
Are you looking to pay less interest?
The loans market is highly competitive and interest rates can vary significantly between lenders, so one of the most common reasons for refinancing is to get a lower rate. This could help you pay off your home loan sooner and save you thousands of dollars over time.
Even if interest rates haven’t fallen since you first took out your loan, you can sometimes access a better rate if your financial situation has improved. This is where a broker can be invaluable; they can help find a better interest rate and advise you of lending facilities that may suit your lifestyle. Rather than moving banks, this could mean renegotiating a better deal with your existing lender.
Keep in mind, however, that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan, so be sure to carefully consider all rates, fees and features.
You want to change your loan type
You may want to switch from a variable loan to a fixed loan to lock in a low interest rate with either your existing lender or a new one. Depending on the type of mortgage you have, this may require refinancing into a different product. You might also have to refinance if you want to change to a split loan, which has part variable and part fixed rates.
You’d like to access the equity in your home for other uses
As you pay down your mortgage and property values increase, the equity you have in your property builds up and becomes a valuable asset. By refinancing, you can access that equity to generate funds to use in wide variety of situations – to renovate or extend your home, for a deposit on another investment property, or even to invest in shares.
Your circumstances have changed
Things change. Perhaps you’ve had a significant rise (or fall) in your income. Refinancing can help to manage your new situation. By taking out a new mortgage (or increasing your limit on the existing one) you may be able to consolidate other debts such as personal loans and credit cards, into one facility, lowering your monthly repayments and saving you interest. If your finances have improved, on the other hand, you may want a different kind of loan product with alternative features, such as a mortgage offset or extra repayment facility to allow you to pay off your mortgage sooner.
Starting the refinancing process
Whether you are savvy with your money or managing the family finances isn’t your strong point, everyone can benefit from paying less interest on your home loan.
To start the process, we will need to assess your current situation and find out about your
- existing loan, repayments and current loan structure
- your current financial situation, including your income, any other current debts and about any assets you own
- the current value of the property
We will then review the various loan options and provide recommendations on whether you should refinance. Contact us today to discuss how we can help.