What is refinancing?
Refinancing is where an existing home loan is replaced with a more cost-effective and flexible loan either through the same lender or through an alternative lender.
WHAT ARE THE REASONS PEOPLE REFINANCE?
Some of the main reasons that people will refinance their mortgage are:
- To save money;
- To change to a shorter loan term;
- To access better features;
- To access home equity; and,
- To consolidate other debts.
Refinancing to save money
You may find that there is a more suitable solution for you to refinance to with a lower interest rate than you are currently paying. A lower interest rate could mean that you end up pay less interest over the life of the loan and lower monthly repayments.
Refinancing to a shorter loan term
During times when interest rates are low you may be able to refinance your loan to a shorter loan term with little change to your monthly repayments. In turn you may be able to pay off your loan quicker and also save yourself on interest.
Refinancing to access better features
There are a number of features that can be included in your home loan solution. Some products may allow you to do things such as make unlimited additional repayments with no fees or utilise a redraw facility and/or an offset account. You may wish to refinance to a mortgage solution that allows you to use features and benefits that you do not currently have access to.
Refinancing to access home equity
Equity can be used to secure finance or free up funds for things such as an investment property or renovations on your home.
Refinancing to consolidate other debts
If you are dilligent with your mortgage repayments you may be able to look at considation other high interest debts into your home loan.
Things to Consider
What do you want?
If you are thinking about refinancing it is important to know what it is that you are trying to achieve. Are you looking to secure a lower interest rate? Access equity for renovations?
Once you know what you are trying to achieve by refinancing you can then go and speak to your broker about how you can achieve this.
Do the financial benefits outweigh the costs?
Refinancing may save you money over the long term, however depending on your existing mortgage solution the upfront costs may be expensive. It is a good idea to investigate the costs assosiated with refinancing your home loan - these could be things like discharge fees, registration or mortgage fees and break costs if you have a fixed rate loan.
Other costs to consider are things like application costs if you swap lenders, establishment fees, legal fees, valuation fees, stamp duty and lenders mortgage insurance.
For more information about mortgage refinancing, or to book a complimentary mortgage review with one of our finance brokers, contact us today on 1300 663 943.
Thanks for taking the time to read this article and we look forward to helping you achieve your financial goals.
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Disclaimer: All information contained in this article is general only and your personal circumstances have not been taken into account during its preparation. You should seek independent advice before making any decisions in relation to your personal finances. Finance and refinance availability is subject to applicant satisfying lenders qualifying criteria and all approvals are at the discretion of the lender.