The benefits of refinancing a home loan will vary with individual circumstances, as finance needs are often changing, so it makes sense to review your home loan from time to time. This makes sure that it still suits your current circumstances. As your circumstances are changing, so are Home Loan products, rates and features that lenders offer. If you haven’t reviewed your loan for a few years, now is the perfect time to check out the best offers available today with an experienced Credit Adviser.
There are number of different reasons to consider refinance, but the most common are:
Obtain a lower interest rate
By obtaining a lower interest rate on the same loan amount, home owners can reduce their monthly repayments, this gives them the opportunity to save money for something else. Also, what some home owners do is, to keep their monthly repayments the same as with their current loan, which then reduces their loan term. Now that interest rates are very low, some home owners have managed to reduce their loan term by several years. This can be done by maintaining the same repayment amount as when the interest rates were higher.
One of the most common reasons for refinancing is debt consolidation. Personal loans and credit card debt usually have much higher interest rates that the home loans. One option is to consolidate them and potentially decrease your total monthly repayments.
Change from Variable to Fixed rate
Due to changes in personal circumstances, some people prefer to fix the interest rate on their loan rather than leave it on a variable rate. This gives them certainty for the period of the fixed rate term ( usually 3-5 years). For example, a young family with small kids who knows that they will be on one income for some time may prefer to fix their home loan rate. This gives them certainty that their repayment will not increase for the selected term, enabling them to manage their budget.
Home equity is the difference between the property value and balance of the mortgage against that property.
Home owners that have owned their house for a while might have a significant level of equity available. If the property is refinanced some of the equity can be released. Many home owners seek funds to do renovations or improvements to their property, so the equity release might be the best option for them. People also use equity in their property to purchase a new car, for a holiday or to pay for kid’s education.
Releasing equity in your existing property(s) to use as a deposit to buy an investment property or to invest money into managed funds is another common reason the explore the benefits of refinancing your home loan.
Refinancing may be a good opportunity to help achieve your personal goals and to help build wealth, at the very least it is a chance to review your current home loan and make sure you aren’t paying too much interest.