Have you got refinancing on the mind? With the potential to enjoy big savings off your monthly repayments and the opportunity to expand the range of features available on your loan, now may be an ideal time to consider your options and the pros and cons of refinancing!
Refinancing generally refers to the process of replacing your existing loan with a new loan from the same or a different lender. While refinancing can involve some paperwork, it can definitely prove to be worth the effort.
It makes good financial sense to check if your existing home loan offers a competitive interest rate, charges minimal fees and offers useful and value-for-money features suited to your lifestyle and needs. If not, it might be a good idea to weigh up your options and look into what refinancing could do for you and your family, financially.
There are several reasons why refinancing is a popular option for home and investment property owners.
With a greater number of Australians realising the opportunities associated with refinancing, I have been seeing more people take advantage of this feature.
Let’s take a look at an example of the savings that could potentially be made by refinancing to a ‘cheaper’ loan. Refinancing a $300,000 home loan with a 30 year loan term that currently has an interest rate of 7% to one with an interest rate of only 6.7% could reduce your monthly repayments by around $60 and cut approximately $21,600 off the total interest owed.
Apart from the obvious reason for refinancing to a home loan product with a lower interest rate, there are many other reasons why people refinance. This includes accessing equity to buy an investment property, car or boat, taking a holiday, undertaking home improvements, buying shares, or accessing funds for education or to improve your every day living.
Another reason is to consolidate multiple debts into one single loan. Folding a personal loan or credit card balance into a home loan can make the repayments more manageable and may also help to reduce your regular repayments, especially for credit card debt, which can attract interest charges as high as 18%. However, this will depend on a person’s individual circumstances and repayment ability. You must also remember the debts are then stretched over the lifetime of the loan, which attracts more interest.
Despite all of these great opportunities available through refinancing, there are many important factors to consider before deciding to switch home loans.
Keep in mind that refinancing a loan can incur costs such as early exit fees (that will only apply to some loans take out before July 2011), fixed rate break costs, registration fees, lenders’ mortgage insurance and account keeping fees. For these reasons and more it is essential to check that the benefits outweigh the costs.
Above all, research is the most important aspect when refinancing is on your mind. It’s important not to focus all your attention on the loan’s interest rate, but to also look at the loan’s structure, fees and features. Also consider that there is a wide range of loans on offer from a growing number of lenders including the major banks, smaller banks, credit unions and building societies.
Keep these tips in mind when thinking about refinancing your loan.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"