- Posted 30 Mar
- 0 Comments
The days of sticking with your bank through thick and thin are well and truly gone. Banks increasingly prey on “rusted” on clients with fewer rate changes and less benefits. In the current competitive climate it pays to refinance your mortgage regularly ensuring you are getting the best deal.
Often refinancing your mortgage doesn’t even mean you have to change banks. Sometimes it can be simply changing mortgage product or even threatening to change your mortgage product. Banks and other lenders have armies of people trained to help.
Getting a better rate
There are hundreds of reasons why you should consider refinancing. The main one: getting a better rate. Hundreds of refinances happen every day and for the majority of the time the main reason is getting a better rate. The mortgage market is so competitive. A mortgage deal signed up two years ago, is not likely to be the best mortgage deal today.
There are thousands of people in the market who can get you a better deal. Invariably they will almost always be able to get you a better deal. Compare you options or better still get Australian Credit & Finance to help you achieve a better deal.
Consider the benefits of a cheaper rate home loan. Using the example of a $300,000 home loan over 25 years, the difference in repayments between 5.5% and 5.0% are striking. For 5.5% the repayment amount is $1842.26 versus $1753.77 for the 5% loan. Put another way that’s an extra $90 a month you are paying off on principal, which will both save you time off your loan and interest throughout the life of the loan.
Pay off a Loan Faster
You might have a fixed rate loan with only a limited ability to adjust repayments. You have just got another job, a pay rise, even won lotto and you want to pay down more. A refinance might be possible to allow you to pay down that loan. Remember however some lenders may charge a repayment penalty on your loan.
Improve the terms of your loan
You’d think it was all about the interest rate sometimes it isn’t. Some loans are just better than other loans for a lot of different reasons. One common example is changing your loan so you can add offset to your loan balance. May people use offset as a way to reduce their interest bill and keep savings in the bank.
Another common reason for refinance is that low equity loan you took out some years back will now stand as a standard home loan as you have 20% equity in your property. You’ll be surprised at the options that open up as a result of that change.
Consolidate your Debt
Got personal loans or credit card debt? Sometimes it can be good to explore the opportunity of consolidating your debt. Credit card and personal loan debt has a vastly higher interest rate than housing debt. Refinancing assists in reducing that interest expense. Warning! While this sounds good in practice make sure you don’t extend the life of the credit card or personal loan debt over the entire length of the home loan term. Where possible, increase repayments to cover the newly consolidated debt. You’ll not only pay less interest, but also reduce the term of the loan.
Rebuild or Renovation
Got some equity in your property? The ability to renovate your property may be a realistic proposition. Refinancing your loan to enable money to be advanced to pay for renovations may be a good thing.
You’ll be surprised at the options available to you. Even if you don’t have a lot of equity in your property you’ll be surprised at what you might be able to achieve with a building/renovation loan that will increase the value of your property.
A common reason to refinance your loan is to buy another property. When you have enough equity in your property many people will want to access this equity to enable another house purchase. Refinancing a loan in this circumstance makes a lot of sense. Refinancing especially to achieve another loan account makes a lot of sense financially as it is clear what interest is attributable to what account making your tax situation simpler.
Typically people will separate accounts and purchase even multiple properties using their existing residential property as security for the loan.
Refinancing is become particularly common exercise for individuals. Typically achieving a better rate is the most common with people looking to access equity in their property second.
When you refinance you need to make sure that you are getting the best deal possible. This might not be simply interest rates, but also a combination of rate and fees. Quite often the lowest rate has the higher fees. While this is certainly not a rule you need to be sure that you are getting the best deal overall.
You might also be interested in: