Refinancing your mortgage could be an option for you. Refinancing involves replacing your existing home loan with a new one in order to secure a more competitive interest rate, reduce your repayments, consolidate your debt or access more flexible loan features.
A few reasons you might choose to refinance:
To secure a more competitive deal
You might be able to move into a loan with a lower interest rate, reduce the value of your repayments each month and give you the ability to pay off your loan sooner.
To access flexible home loan features
You may benefit from accessing certain home loan features such as an offset account or redraw facility.
An offset account is essentially a savings account attached to your home loan which helps you reduce the amount of interest you pay each month. The balance held in this account "offsets" the balance in the mortgage, helping to reduce the interest paid and overall term of the loan.
A redraw facility is a home loan feature that’s attached to your mortgage and gives you the opportunity to make extra repayments on your home loan – which helps to reduce the interest costs.
To consolidate debt
You may have taken on other debt since you got your home loan such as credit card, personal loans or a car loan. Refinancing may present the opportunity to consolidate your debt into one loan.
You might want to switch from a fixed rate to a variable rate home loan. If you’d like to take advantage of the low interest rates currently on offer, or you want to increase your cash flow - you may want to consider a fixing the interest rate on your mortgage. This provides you with repayments certainty each month.
Variable loans on the other hand, can help you pay off your home loan sooner however, you ‘re at the mercy of your lender, the Reserve Bank and the market when it comes to your interest rate with this product.