If you have a home loan, you’ve likely heard someone say before that 'you should look into refinancing.' But what actually is refinancing? In simple terms, refinancing is where you pay out the loan with your current lender and establish a new loan with a different lender. Here are a few reasons why you might consider refinancing à
Get a more suitable Interest Rate
Banks have no loyalty to you and if you leave your rate unchecked, you’ll be paying a higher interest rate then you should be. The most common reason for refinancing is to take advantage of lower interest costs. A difference of even 0.25% in interest rate can save you thousands each year in repayments and in the current economy that can be significant.
Fix your Home Loan
If you're concerned about the potential of rising interest rates or simply want to secure a stable repayment plan for a set period, it can be advantageous to refinance and fix a portion of your loan. Your current bank may not be offering competitive fixed rates, making a refinance a prudent consideration.
To Consolidate Debts
If you're facing high interest rates on credit cards, personal loans, or car loans, consolidating your debts into your home loan can be beneficial. You can achieve this by refinancing and topping up your existing loan, then using the surplus funds to pay off those debts. This approach can reduce your monthly commitments and free up cash flow.
Complete Renovations
Much like consolidating your debts, you can also top up your home loan to fund renovations on your property. Whether it's as small as updating furniture or as significant as adding a new bedroom or renovating a bathroom, this strategy can be beneficial, especially if you don’t have the required cash in savings.
Access Different Features i.e. Offset Account
Refinancing can offer benefits when transitioning from one lender to another, especially if you're seeking different features or increased flexibility. For instance, you might be interested in acquiring an offset account, a feature that your current lender doesn't provide. Incorporating such a feature can lead to substantial savings in the long run.
These situations, among many others, highlight the benefits of a refinance and as a mortgage broker I can help you navigate this. I act in the best interest of you and if your current situation is appropriate for you, I will let you know. Get in touch today for a free review (I should note my service is completely free all the time anyway) of your current loan to ensure that it’s appropriate for your situation.