Refinancing is all about getting a more competitive deal.
When was the last time you checked your interest rate? Or had a look at other offerings in the lending space?
If you answered no to either of these questions, or it has been longer than 6 months since your last check you could stand to save money on your home loan. With interest rates currently sitting at a historic low, you may be overpaying. By refinancing, you could gain access to a more competitive interest rate, save you money or perhaps allow you to pay your loan off sooner than anticipated.
If you are unsure if refinancing is the right option for your circumstances, keep reading.
It’s natural that things change with time. Big life events we go through include a new job, promotion, marriage, children, medical events and relocations. These can play a huge part in how your circumstances change and your original loan may not meet your current needs as well.
Your finances change as your needs do and your home loan is no exception. If you’ve had a home loan for a few years now, t’s safe to assume your life has changed somehow in that time.
Equally, you might be near the end of a fixed rate term or interest only period so now is a great time to find out what your options are. Refinancing will allow you to ensure your home loan is still in line with your needs and goals.
As your needs and financial situation change over the years, you might be able to contribute more towards your home loan and pay off that debt sooner.
Many loans come with additional features that can make it easier to reach your debt free goal such as redraw options or an offset account.
By paying your salary into an offset account, you reduce or offset the interest you pay on your mortgage each month. A redraw facility allows you to access any additional repayments you’ve made on your loan in case of a rainy day.
Alternatively, you could also switch to a simpler home loan with less features and save the costs.
Equity is basically calculated by subtracting the remainder of your mortgage from the market value of your home, usually determined by some sort of valuation . If your home loan has increased in value while your loan has decreased, the difference is your equity.
If you purchased in an area that has experienced some decent value growth while you’ve been paying down your mortgage, or made some quality home improvements, you may have a substantial amount of equity in your home. Likewise if you have made a huge effort to pay the loan off early.
Equity can be a powerful tool if used wisely. You could use your equity to renovate, build a granny annex to keep the family close and help them save or even put it towards the purchase of an investment property. The opportunities are out there!
