6 reasons to refinance your home loan.
Why refinance?
Life’s always changing. Since you bought your home, your family structure, lifestyle or financial situation may be different. There might be another home loan that’s more suited to your life now – and offers you a better deal.
If you compare home loans and find one that’s better suited to you, that’s when you may want to consider refinancing, which means moving your loan from one lender to another.
You might want a better interest rate, more flexible features, to consolidate your debt, or to use the equity in your home to renovate or invest. Here are some of the reasons to refinance in more detail.
1. You want a lower interest rate.
Refinancing for a lower interest rate could not only save you money – it could also help you pay off your home loan sooner. It means your repayments might be lower every month, which means more money in your pocket. Or, if you use some of that saved money to continue making larger repayments, you might pay your mortgage off faster and save on total interest paid.
Every lender uses many different measures to set their interest rates. That’s why it’s important to speak to a Home Lending Specialist or broker to understand what rates you can access.
2. You want a loan to suit your current needs.
There’s more to a home loan than just the interest rate. If it’s been a while since you bought your house, there might be new features that you didn’t know about.
You might be interested in features designed to help you save on home loan interest and pay your loan off sooner, like offset transaction accounts, or the ability to make extra repayments.
Or maybe you want to split your loan between variable and fixed rates. Some home loans also let you choose your repayment frequency, provide you with a rewards credit card or allow you to redraw your extra repayments without fees.
3. You want a fixed rate home loan.
You could be coming to the end of a fixed rate term and want to see if you can get a better interest rate or a more flexible home loan once your fixed term ends. Fixed rates can work really well in the right situation but often when your fixed rate term ends, you’re rolled over to a higher variable rate by default.
If you wait until after your fixed term to refinance, you may avoid paying a ‘break cost’ fee associated with leaving a fixed rate home loan, which makes it a prime time to look around at what home loan offers are available.
4. You’re paying off your other debts.
You could be trying to simplify your finances and save money by consolidating debts like your personal loan, car loan or credit card into your mortgage. Every lender has different rules about combining multiple debts into one consolidated loan, but debt consolidation is a handy feature of many home loans and might be a reason that you consider refinancing.
5. You’re renovating.
If you’re thinking of renovating, you might already have extra value (equity) in your property to use. If your property has increased in value or you didn’t use all the available value when you first borrowed, you might be able to unlock this to renovate.
6. You want to invest.
If you’re refinancing to access the equity in your home, you could use those funds to invest in property, shares, or other opportunities.