When Should You Consider a Refinance?
Refinancing your home loan is a consideration many home owners come up against on a regular basis. How and why you refinance are questions you need to ask when deciding if it is worth while or not. There are a number of reasons to consider refinancing and Ive listed some of them below:
To reduce your monthly repayments
Saving money is one of the key reasons people choose to refinance. It makes sense doesn't it? If you are paying a higher interest rate or excess bank fees you are better off considering a cheaper home loan which saves you money over the longer term. It is possible to save a considerable amount in interest over the life of your loan even with a small rate reduction.
To access equity
If you have built up some equity in your property since you first bought it, refinancing is a method for you to gain access to your equity and put it to good use. Equity is the difference in the value of your home and your current loan balance. Eg. a $500,000 property with a $300,000 home loan as got $200,000 in equity. If you wanted to access part of those funds for further investment or to spend on something you can refinance and release those funds.
To consolidate debts
If you have got a number of small debts like personal loans, credit cards, car loans etc these can eat away at your monthly cashflow. Personal debts often have excessive interest costs associated with them so if you are only making the minimum repayments it could take a very long time for them to get paid out. By refinancing your home loan you can pay out all the small debts and consolidate into one monthly repayment. This can make your life easier and you can in fact reduce the monthly repayment amount given a lower home loan interest rate.
One tip if consolidating is to maintain your repayments at the higher level so you pay your home loan down faster and you don't get stuck paying of your car loan over a 30 year period as that will then cost you more than the original loan!
Refinancing is great way for you to achieve your financials goals be at saving money, paying off debts or accessing equity for other purposes. Of the many lenders and home loan options out there it is important to find the right deal which suits your situation as you want to get your refinance right the first time instead of switching over to a product that may not suit.
For a no obligation review and advice on who may be the right lender for you please inquire via the contact page and we can make an assessment within 24-48 hours.