If you’ve already managed to secure a home loan and been steadily chipping away at your repayments as you enjoy the capital growth of your property soar, you are an ideal candidate for refinancing your mortgage to give you access to money that might come in handy for home renovation projects or other lifestyle needs.
But refinancing isn’t only about giving you access to some additional cash to spend. Whenever you change the terms of your current loan for the purpose of securing a more competitive interest rate, making your regular repayments even more convenient, or switching from a variable to a fixed rate loan, you are effectively refinancing your home loan.
Depending on your individual financial goals, you can use refinancing to:
Reduce interest rates
If you use a mortgage broker to help you shop around for a more competitive interest rate, the ability to access new interest terms could save you thousands of dollars on mortgage repayments over the lifetime of your home loan.
Lower monthly payments
Sickness and other personal circumstances can affect your ability to earn an income and if the flow-on of that is a period of financial hardship, refinancing your loan can give you the breathing space you need, thanks to new loan terms and ongoing repayment adjustments.
Transition to a fixed rate loan
When markets are volatile, that variable rate that once seemed positive can cause financial stress. One way to reduce that stress is by refinancing your mortgage to secure a fixed interest rate where your repayments are set for a specific term, regardless of increases in interest rates.
Re-pay the loan faster
Circumstances change and if yours have shifted for the better – either from being given a higher-paid promotion or finding a new job with better pay – negotiating to refinance your mortgage can make the difference your budget needs. With the length of time you repay your mortgage reduced, you can save thousands of dollars across the lifetime of your loan.
If you have more than one significant debt, such as credit card debt, personal loans or car loans, you can streamline your debt commitments by refinancing them as part of a debt consolidation strategy.
The benefits can be enormous – and not only financial. By creating one debt with a competitive interest rate, rather than many different debts with a variety of interest rates and different scheduled repayment dates, you can manage your cash flow better – with less personal stress.
Improve your property
With equity in your home, you can access funds to do a home renovation or property refurbishment and can even use equity for other spending, including buying a new car, landscaping or installing new heating/cooling – even putting a pool in for summer.
It’s important to remember that the purpose of refinancing is to add value, either financially or personally. Your ability to access a lower rate depends on a number of factors, including credit history and employment history but by talking to an experienced mortgage broker, you will have easy access to a range of lenders that can assess your individual circumstances and offer you competitive rates to save you money over the life of your home loan. Weigh up the costs of changing loans against the money you can save to see if refinancing your property is right for you.
Making the best possible decision depends on how long you plan to stay in your property and your long-term financial goals.
For more information about refinancing your mortgage, talk to one of our home finance specialists at Lending Specialists today.