Many Australians are comfortable staying with their current home loans but that is an action that can cost them a lot of money in the long run. If you would like to save money on your home loan, refinancing could be the right move for you.
Wondering why everyone talks about refinancing. Here’s 5 good reasons to talk about refinancing sooner than later! If you’re looking for ways to reduce your monthly mortgage payments or pay off your mortgage sooner, refinancing your home could be what you’re looking for.
Put simply, refinancing involves replacing your existing home loan with a new one, ideally with better terms and lower interest rates.
In this blog, we’ll explore the top 5 reasons why you should consider refinancing your home in Australia.
1. Lower Interest Rates
One of the primary reasons people refinance their homes is to take advantage of lower interest rates. Interest rates can fluctuate over time, and it’s possible that your current home loan may have a higher rate than what’s currently available on the market.
It’s also well known that banks will increase your interest rate over time, whilst offering lower interest rates to entice new customers. Refinancing can help you secure a lower interest rate with a new bank, which can save you thousands of dollars in interest payments over the life of your loan.
For example, consider a family in Brisbane with a $580,000 home loan at an interest rate of 5.5%. By refinancing their home loan to a new loan with a lower interest rate of 4.7%, they could save 0.8% on their interest rate, resulting in a savings of $3,420 per year in interest payments, or $285 a month in repayments. They also have the option of keeping the same repayments but paying their home of 5 years sooner.
2. Debt Consolidation
Another reason to refinance your home is to consolidate your debts. If you have multiple debts, such as credit card debt, buy now pay later debts or personal loans, you may be paying high interest rates and fees on them – the late payment fees on these types of debts also add in a heap of cost.
By using the equity, you have in your home you can consolidate your debts into you home loan. This will likely reduce your overall interest rate and simplify your finances with one regular repayment.
3. Change Loan Terms
Refinancing your home also gives you the opportunity to change your loan terms. If you currently have a 30-year loan, you may want to consider refinancing to a shorter loan term because your income has increased. This could be a 15 or 20 year loan meaning you will pay off your mortgage faster and reduce the amount of interest you pay over the life of your loan.
4. Access Equity
If you’ve built up equity in your home, refinancing can provide you with the opportunity to access that equity. You can use the funds for home renovations, investments, holidays, or other expenses. It’s important to remember that accessing equity will increase your loan amount, so you’ll need to ensure that you can comfortably afford the new repayments or the increase in term of your mortgage.
5. Change Lenders
Finally, refinancing your home can give you the opportunity to change lenders. If you’re unhappy with your current lender’s customer service or fees, refinancing to a new lender can be a good option. You may also find a lender who offers more competitive interest rates and loan terms or provides a cash back incentive to switch your business.
In conclusion, refinancing your home in Australia can be a good financial decision for several reasons. By securing a lower interest rate, consolidating your debts, changing your loan terms, accessing equity, or changing lenders, you can save money and improve your financial situation. Importantly for a lot of people this reduces cash flow stress. As always, it’s important to do your research and seek advice from a financial professional before making any major financial decisions.
Looking to refinance your home loan?
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