December 11, 2024 by Mortgage Choice
People choose to refinance their loans for many different reasons: whether it's to update their finances to align with their goals or simply to save money. But one thing's for sure, in this economy, refinancing plays an important part in keeping living costs down. Here are five of the most common reasons Aussie households are refinancing:
Secure a better interest rate
Your interest rate may have been competitive when you first took out your loan, but this can easily change over time. Securing a better interest rate can help lower your monthly repayments and potentially cut thousands of dollars from the overall cost of your loan. Just keep in mind that if you switch to a variable rate mortgage, your rate may rise in the future.
Change your loan structure
If your current loan has a variable interest rate, you may decide that you would prefer the certainty of a fixed rate. Or perhaps you want to fix part of your loan and keep the rest variable. Refinancing can help you find what you’re looking for. It may even be possible to do this with your current lender without needing to refinance.
Consolidate other debts
Even with rising interest rates, mortgage rates tend to be much lower than other types of debt such as credit cards and personal loans. Refinancing your home loan gives you the opportunity to roll other expensive debts into your mortgage, which may reduce the total amount of interest you’re paying. Debt consolidation also streamlines debt management because you only have to make one monthly repayment instead of multiple. The main thing you need to consider with this strategy is that it can turn a short-term debt into a long-term debt. For debt consolidation to be truly cost-effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.
Take advantage of different features
If your current loan doesn’t suit you anymore, you may want to switch to a loan that does. This might mean accessing features such as a redraw facility or offset account, or even taking advantage of a bundled package loan offering. On the flip side, if you’re not using most of the features that come with your current home loan, it might be worth switching to a more basic loan. These loans generally cost a bit less than home loans with lots of features.
Unlock your equity
Your home can be much more than a place to live. It’s also likely to be one of your most valuable assets. If you’ve lived in your home for a while, it's likely that its market value has increased. This means you’ve built up some equity that you can tap into. Refinancing can help you unlock the equity in your home to finance a renovation, take a holiday or use as a deposit to purchase an investment property.
Is it time for a home loan review?
We’ll evaluate your current home loan and compare its rates, fees and features with thousands of other products to check that you have the loan that’s best for you.
Even if you’re not ready to refinance right now, it makes sense to meet with your broker annually to ensure your loan still meets your needs.
Get in touch
If you’re considering refinancing your home loan, get in touch with me for expert advice! I'm here to help you achieve your short, medium and long-term goals. Call me directly to chat on 0422 096 001 or email adam.reed@mortgagechoice.com.au
