Five reasons to refinance your home loan
Many people regularly make the mistake of selecting a home loan and riding out whatever the original loan terms and its prevailing interest rate dish up. What people may not know is there are several ways you as the borrower can benefit from refinancing your mortgage.
1. Find a lower interest rate.
The mortgage market is very competitive so as interest rates rise and fall you may be able to refinance your mortgage at a lower interest rate. The benefits are that you can then…
2. Reduce your home loan repayments.
For a given loan term the lower the interest rate the lower your repayments. This then frees up some of your income for other purposes. Or you can…
3. Shorten the term of your loan.
If you maintain your current repayments with a lower interest rate loan, you’ll pay it off sooner and save on interest.
4. Switch from a fixed to a variable rate mortgage (or vice versa).
A fixed-rate home loan will provide protection against rising interest rates. However, when interest rates are falling, a variable rate loan is the better way to go. You should be aware that interest rates are unpredictable and even the experts can get it wrong when it comes to predicting the direction of future interest rates.
5. Consolidate debt or access equity.
If your home has increased in value then refinancing may allow you to access some of the greater equity you have in your home. This may allow you to pay off higher-interest debt, such as credit cards, take a holiday, or pay for renovations.
While refinancing a home loan can be a winning strategy this is not always the case. If the difference in interest rates between the old and new loans is small, it may be difficult to gain a real benefit,
To find out if you’re getting the best deal from your mortgage, talk to a qualified professional (like Enrizen’s Frank Da Luz) for personalised, rather than general advice.