News
They say as a rule of thumb, you should be in contact with your bank every four years to make sure you are getting the best deal from them.We know that it can sometimes feel as though a home loan is put in that “set and forget” pile, but it really can pay to make sure your bank keeps working hard to keep you as a customer.
These discussions may not always result in a complete refinance of your home loan, but there are times that a refinance discussion should definitely be on top of the list! It should be said, your bank isn’t the only place to have this discussion, it’s worth engaging a mortgage broker who’ll give you the lay of the land outside your current lender too (we can introduce you to some of our contacts in this field too).
Here is a list of some of the positives of refinancing, and also a few things to consider:
1. Lower interest rate
Another bank may be offering a lower rate, and this can be a great way to save you thousands in repayments and potentially even lower the term of your loan.
But make sure you always do your homework, as advertised rates are almost always different than the actual comparison rate. There can also be expensive break fees and costs so it pays to make sure the benefits will outweigh the costs. If you are thinking of selling in the very near future or your loan term only has a couple of years left, it may be better off sticking where you are. We can help you assess your financial situation and help guide you in the direction of what could work best for you in this situation.
2. Debt consolidation
By using some of the equity in your home, you can consolidate your debts and effectively have your home loan pay off your other debts such as credit cards and personal loans. This helps you clear your more expensive debts and consolidate them onto your loan, which usually has the cheapest interest rate and longest term.
Things to consider here can be unwanted attention by the bank into your current financial position and Lender’s Mortgage Insurance (LMI)if your equity will drop under 20%.
3. Reduce your loan term
Refinancing allows you to increase or decrease your loan term, from 25 to 30 years for example or vice versa. Increasing your loan term would decrease your monthly repayments. Decreasing your loan term means you would pay off your loan quicker and reduce the amount of interest paid on the loan.
4. Flexibility or new features
If your home loan seems a bit old school with what it offers, it may be a good idea to shop around to access greater flexibility and features within your loan. These may include offset accounts, lines of creditor a redraw facilities without fees. A mortgage broker will work to show you the most competitive options that fit what you’re after here.
5. Accessing equity – renovations or buy investment property
Equity is the amount you have paid off on your loan, in comparison to the value of your home. If the value of your home increases, you may also find your equity increases – which many Australians are most likely experiencing right now! When you refinance, you can request to access this money from your bank. The bank will assess the equity in your home against your repayments and decide whether to lend the additional money. As with any other lending, this will also require a deep dive into your current finances, so chat with our team to make sure you’re going in with your best foot forward.
You can use this equity for renovations, a deposit for another home, investment property or even for a holiday (limitations apply hereof course).
For help assessing your financial situation and building a plan around your debts, get in touch with our team today – we’re here to help you build the best financial future possible.
Call us on 1300 866 113 or email us to start the conversation.
