When shopping around for a home loan, most people spend time comparing lenders before making a final decision.
When shopping around for a home loan, most people spend time comparing lenders before making a final decision. That’s because they want to ensure they are getting the best deal for their circumstances. But for many, that’s where the scrutiny ends. The terms of the loan are agreed upon, the contract is signed and then quickly forgotten.
A “set and forget” attitude to home loans can mean that you lose out on the opportunity to negotiate a new rate or add in product features that might better suit your changing lifestyle.
Here’s 5 reasons why refinancing your mortgage might make good sense.
1 – YOU WANT A LOWER INTEREST RATE OR MONTHLY PAYMENT
Sometimes new customers are offered a low interest rate at the commencement of their loan. Over time this rate will rise and fall. Keep an eye on your repayments. Look at the market – is your rate competitive? Tip: If you do negotiate a better rate with an alternate lender, remember to ask about any exit fees that may apply to your existing loan.
Another factor that might work to reduce your repayments is to lengthen the term of your home loan. Depending on your circumstances, a lower monthly payment spread across a maximum loan term, may be a better match for your cash flow. (Most lenders maximum loan term is 30 years).
2 – YOU WANT TO CONSOLIDATE PERSONAL DEBTS INTO YOUR HOME LOAN
Our clients often choose to refinance their home loan so that they can consolidate debts. With most mortgages it’s possible to bundle any high-interest personal debt into one repayment.
Refinancing to consolidate debt means that you are using a mortgage to pay off the money that you owe to creditors. Because your home becomes the security backing that loan, it’s likely your ongoing repayments will decrease because the life of the loan has become longer.
3 – YOU WANT TO ACCESS DIFFERENT LOAN FEATURES
Another common reason to refinance is to access new loan features.
Many new clients will contact us about an interest-only period on a residential investment mortgage. Others are looking for a redraw facility or want to make their repayments weekly rather than monthly.
If you’ve built some equity in your home, it can pay to shop around. A higher deposit can open up the door to loans with features that are a closer match to your needs.
4 – YOU WANT MONEY TO SPEND ON A SHORT OR LONG TERM GOAL
Sometimes you want to refinance so that you can use your home loan to access cash for other goals – renovating or expanding your business for example. If you’re a residential property investor, you may choose to refinance your mortgage so that you can borrow additional funds for a residential investment property.
5 – YOU WANT TO SHORTEN YOUR LOAN TERM
While a lot of people turn to refinancing to lower monthly payments, maybe you’re in a fixed loan and looking to do the opposite – pay off your mortgage quicker. If you’ve experienced some financial fortunes, like a promotion or a new higher-paid job, you may want to pay off your home loan sooner.
Refinancing to a shorter loan term, or one that lets you make penalty-free lump sum repayments can help you pay down debt sooner. Just make sure you factor in any exit fees associated with your fixed loan when weighing up your options so you can make sure you still come out on top financially.
To find out more, or to review your current loans, get in touch with a Centra Money finance specialist for a confidential and obligation-free appointment at (08) 8211 7180 or info@centramoney.com.au
