April 02, 2015
Most people think that the only reason they would consider refinancing their home loan is to get a lower interest rate.
While a lower interest rate is a very good reason to refinance, there are a number of other reasons why refinancing your home loan makes sense. Let's look at some of the main reasons to refinance:
Obtain a lower interest rate
Securing a lower interest rate can help you lower your monthly repayments and cut thousands of dollars from the overall cost of your loan. With interest rates at historic lows, competition between lenders has never been fiercer with some fantastic home loans deals currently available.
Switch between a variable or fixed rate
Many borrowers still prefer the certainty that fixed rates give that their repayments will stay the same for a period of time. While conversely, switching to a variable rate will allow you to benefit from future cuts in interest rates.
Consolidate other personal debts
Consolidating other personal debts such as credit cards and personal loans into your mortgage will reduce the overall interest that you are currently paying and may reduce your total monthly repayments.
A word of caution though as consolidating these debts can turn these short term debts into a long term debt (your mortgage) which means you are paying interest on them for a longer period. A way around this is to make additional repayments when you can to reduce the loan as quickly as possible.
Access the equity in your home
The equity in your home is the difference between what your home is worth and the amount outstanding on your mortgage. For example, if your home is worth $600,000 and you have $250,000 owing on your loan, then you have $350,000 in equity.
Reasons to assess the equity in your home include; assisting to buy an investment property, undertaking home renovations or achieving lifestyle goals such as purchasing a new car or going on holiday.
Access additional home loan features
Sometimes it makes sense to assess additional home loan features they you may not currently have with your existing mortgage. These can include; the ability to make additional repayments, the inclusion of an offset account or redraw facility and the ability to split your loan with a fixed and variable rate.
In some instances many of the reasons above can be achieved with your existing lender. So speaking with a mortgage broker like ourselves, can help you to get all the facts so that you can make an informed decision.
To find out your refinancing options and whether it is right for you, call us today on 03 9432 6070 or click on the 'contact us' tab at the top of this page.