Refinance Home or Investment Loans

Why refinance my home loan?

Home owners are a diverse group of people, and that means there is also a whole variety of reasons why you may be thinking about refinancing.

Reasons to refinance

Secure a better interest rateOne of the key reasons home owners choose to refinance their loan is to secure a lower interest rate and reduce their monthly repayments. However, refinancing can come with some costs, so it's essential to weigh up the savings of refinancing against the expense involved.

Switch between variable/fixed rates

If you’d prefer the certainty that repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Conversely, you may decide you'd like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.

Access equity in your home

Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals. Find out more about accessing your home's equity.

Consolidating your debt

Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you're paying on multiple debts through the process of 'debt consolidation'. It means folding several high interest debts into one lower rate debt – which could be your home loan - and may reduce your total monthly repayments.However, it's important to note that debt consolidation can come with some downsides. It can turn a short term debt like a personal loan into a long term debt (your mortgage), and that means paying interest on the balance for a much longer period which could cost you more in the long run. For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.

Access additional home loan features

You may wish to explore a loan that includes:

  • Flexible repayments
    Making extra repayments at no additional cost to help pay off the loan sooner.
  • Repayment holiday
    A break from repayments or reduced repayments to cover career changes or breaks e.g.  maternity leave.
  • Offset account
    Having a savings or transaction account linked to your loan. The balance of the linked account is deducted from, or offset against, the balance of your loan when the monthly interest charge is calculated.
  • Redraw facility
    Enabling you to withdraw any additional repayments you have made on your loan. Handy if you need cash in an emergency.
  • Flexible rate options
    Dividing your rate between fixed and variable components, or even making interest-only payments for a period.
  • Loan portability
    The ability to take your loan with you when you move from one home to another without the expense and hassle of arranging a new loan.

Could it pay to stay?

Refinancing your loan can offer convenience, savings and a chance to achieve personal goals. However there can be times when refinancing doesn't make good financial sense.

It could pay to stay if ...

Costly exit fees apply on your old loan

If this is the case your best option may be to wait until exit fees are no longer levied on your loan. Then have a chat with us to determine when it’s best to switch.

You don't have enough home equity

Without a reasonable level of home equity (usually a minimum of 20% of your property's current market value) chances are you'll be asked to pay Lenders Mortgage Insurance (LMI). The cost can be significant, depending on how much of your property's value you wish to borrow.'Home equity' is the difference between the market value of your property and the balance remaining on your home loan e.g. if your home is worth $600,000 and you have $350,000 remaining on the loan, your home equity is equal to $250,000.A good way to avoid LMI is to boost your home equity. There are several ways to do this:
  • Wait until market values have risen to the point where your equity is above the 20% threshold
  • Take steps to enhance your home's value e.g. through renovations
  • Make additional repayments on your loan to reduce the loan balance

Your circumstances/income have changed

Even if you’ve been repaying your current loan for years, when considering a refinancing application, lenders will look at your ability to 'service' or repay the new loan. If your credit file has a few black marks (e.g. missed repayments or overdue bills) you could be better off staying with your old loan until your credit history is cleared.Alternatively you may have become self employed since taking out your current home loan, or your income may have reduced. In both circumstances you could be regarded as a high credit risk with some lenders, meaning you may not get approval for the loan of your choice, or you might have to pay a higher rate.TIPS AND TOOLSREFINANCING FAQ'S 

 


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