05 Jul 4 top reasons to refinance your home loan
Anyone who has a mortgage will invariably, at some stage, ask themselves whether they should refinance. Although there are many reasons why this question may be asked, this is usually triggered by a change in circumstances – new job, holiday plans, renovations, investment property, etc.
Refinancing may reduce your monthly interest repayments and also offer access to additional loan features, which could be extremely useful for cash flow as well as releasing equity for investment purposes.
By not regularly reviewing your current interest rate and loan options, you are potentially paying unnecessary interest and not giving yourself the best opportunities to maximise your cash flow.
There are 4 main reasons people usually refinance their home, writes Jai Martinkovitz, Managing Director of Finance Ferret and Orion’s Mortgage Broker extraordinaire:
1. Interest Rates
Interest rates are at an historic low right now, which means now could be a great time to check how your rate stacks up and make sure you are still getting the best deal. Why pay more when you don’t have to?
It may be possible for you to access a lower interest rate, which could in turn reduce your monthly mortgage repayments. Just think what that extra money could do for you – pay off your home loan sooner, invest the money elsewhere, or simply improve your cash flow.
Has it been longer than 24 months since you last reviewed your home loan? A good mortgage broker could help you determine whether you are getting the best deal – and if not, they will help you get it sorted.
2. Consolidate your Debt
Another good reason to consider refinancing is to consolidate your debt.
Maybe you want to get rid of a car loan or credit card? In many instances doing this can free up your cash flow, leaving more money in your back pocket at the end of each month.
However, be aware that if you are consolidating a loan that is only, say, 3 years in length to your mortgage of, say, 30 years, you could end up paying more interest in the long-run. Always keep this in mind when considering debt consolidation. If you’re unsure how this works it would be best to speak with a mortgage broker and understand your current position and future plans.
3. Access your Equity
Many people refinance to access equity that is tied up in their property.
Maybe you want to renovate your home? Or take the family on a holiday? Accessing the equity in your property can free up the funds required to do these things.
Another common reason people proceed with a home loan refinance and access equity in their home is to purchase an investment property. The equity could be used as your deposit and let you get another property under your belt.
If you think your property may have gone up in value since you purchased it, there is a good chance that you have equity available to you. It’s a good idea to get a property report which will help you estimate how much equity you have available and what options are available to you.
4. Loan features
It isn’t always about rate. What about the features of your current home loan? If your situation has changed, maybe your loan is no longer suitable.
There are several features that can be taken advantage of. Some examples include the ability to attach an offset account to your home loan and the ability to make extra repayments without penalty. You may also wish to fix your rate, ensuring that you know exactly what your repayment will be for the entire fixed term and can plan your budget around your home loan repayments.
It is a good idea to regularly check you have the right loan features to suit your current situation.
Each of these can be legitimate reasons to consider refinancing your home loan and at Orion Financial Group we can help you arrange this, and any of your loan needs through our friends and partners at Finance Ferret. If you would like to review your loans please let us know and we will organise for Jai Martinkovitz from Finance Ferret to speak with you.