Refinance Your Home Loan
Your individual position can change at the drop of a hat. Whether you change jobs or decide to extend your family, you might find that the mortgage you first chose all those years ago may no longer fit your needs. However, you also need to think carefully before making the shift to another home loan. Here are some common scenarios when home loan refinancing might be a solution for you.
Renovating your home is one the most common reasons for refinancing. In fact, a Roy Morgan Research survey released last year showed that more and more Australians are taking a keen interest in home decorating and design – almost 6.8 million households admitted to keeping up with the latest trends in July 2014. If you’re thinking about doing a bit of work on your home, it might make sense to refinance your mortgage to make space for a construction loan.
Significant construction work, like extending your home or adding a pool, might require you to free up additional cash from your existing home loan. Refinancing can help in this regard. Shifting to a construction loan can actually save you money in the long term, as you only pay interest on the money you need during the building process.
A better interest rate
Interest rates seem to be in the news all the time, so you might want to find a bit of stability and change your mortgage to a fixed rate loan. This can mean you are less affected by sudden economic shocks or fluctuating rates, which could help your back pocket in the long term.
CoreLogic RP Data research showed that the average variable home loan rate was 4.9 per cent by March, which could save households around $150 a week in interest repayments. You might want to play on these tumbling rates and change to a lower rate home loan.
This can reduce the amount you pay each month on interest repayments – but have a talk with your mortgage provider about fees and charges before you make the change. Check for options that have lower or no monthly fees, which can help you gather some impressive savings over time. In any case, you need to be sure that refinancing your current mortgage will leave you better off.
At the same time you’re paying off your mortgage, you might also have a couple of other debts weighing on your mind, like repaying personal loans or your credit card balance. On March 16, The Sydney Morning Herald reported that Australians actually have some of the highest levels of household debt levels (such as mortgages, credit cards, overdrafts and personal loans) citing data from Barclays Bank. As a result, this accounts for around 130 per cent of GDP.
It can often be difficult to juggle debt in your monthly budget, but refinancing can present an opportunity to roll the multiple debts into your home loan. This can potentially save you hundreds of dollars in interest repayments, as you are combining a number of high interest debts under a lower rate loan umbrella.
Whatever your reasons for home loan refinancing, do your research and get advice before you switch.