Are you confident that your current home loan is still the best fit for you? It’s important to remember that circumstances change and what worked for you a few years ago might not be the optimal choice anymore. For example, interest rates may have fluctuated since you first acquired your loan, and so might your life circumstances.
One critical aspect to assess is whether the official cash rate has shifted since you settled your loan. It’s also essential to examine whether your lender has changed the interest rates they’re charging you and whether any additional fees and charges have been added to your account. The market for home loans is always evolving, and new products are continuously being introduced to entice borrowers, so it’s essential to stay informed.
Besides, there might have been changes in your life since you took out your mortgage. Your income and expenses could have changed, and your financial objectives may be different from when you first acquired your loan. Despite the typical loan length of around 30 years, many Australians refinance every 4-5 years. Refinancing is an excellent opportunity to explore the current market and assess whether your current home loan is still the best option for you. If it’s not, it may be time to refinance.
It’s critical to evaluate your financial position, assess your goals and objectives, and shop around to find a loan that’s tailored to your needs. By taking these steps, you can make an informed decision and choose a home loan that best suits your circumstances.
Why should you refinance your home loan?
It is highly recommended to make a habit of reviewing your home loan every one or two years. This is because the market and your personal circumstances are always evolving, which means the home loan that was once suitable for you may not be the best fit anymore and it may be best to refinance your home loan.
Lower Rates and Fees
Undoubtedly, the foremost query to ponder is whether you are paying more than necessary. Opting for a loan with a lower interest rate or lesser fees can be a convenient means to curtail your repayments. This would enable you to free up some additional funds, or even better, pay off a larger portion of your principal, thereby shortening the duration of the loan.
More Features
Interest rates aren’t the only factor to consider when choosing a loan. Sometimes, the loans with the lowest rates may not include useful features that can help you save money in the long run. For instance:
- Offset Account: An Offset account is a separate account that allows you to use the balance to offset the principal amount on which your interest is calculated. By depositing your pay packet into this account, you can significantly reduce the time it takes to pay off your loan.
- Flexible Payments: Flexible payments are another great feature that can help you shorten your loan and save more money over time. You can make extra payments to the loan whenever you have additional funds available. This can help you pay off the loan faster and save on interest charges.
- Redraw Facility: A redraw facility is also an essential feature to consider when choosing a loan. This feature allows you to easily access any extra funds you’ve deposited into your loan. It can be very useful in times of financial emergencies or unexpected expenses.
- Flexible Rates: Lastly, flexible rates are another key factor to consider. Depending on your assessment of interest rate trends (whether they will go up, down, or stay the same), you can choose the type of loan that may save you money if rates go down or protect you if they rise.
It is crucial to take into account these features, in addition to interest rates, when selecting a loan. They can assist you in saving money and granting you more flexibility in managing your finances.
However, it is important to note that each lender has its own set of terms and conditions. Thus, it is necessary to thoroughly examine the impact of these regulations when deciding on a loan.
Refinancing To Renovate
Renovating a home is a popular reason to refinance. If you have owned your property for a significant period and its value has appreciated, you can leverage this equity to finance the upgrades. The added advantage of renovating your property is that it can increase its overall value. To avoid paying interest on the renovation funds until they are utilised, you can deposit the additional funds in an ‘offset account’.
An alternative option to explore is a ‘line of credit loan’, similar to a credit card with a higher limit and typically a lower interest rate. You can withdraw the funds as required during your renovation, and only pay interest on the amount used. Homeowners commonly refinance to finance renovation projects, as it is an effective way to fund upgrades and add value to the property.
Why Using A Broker Is The Smart Way To Go?
While it’s true that banks do offer financing options, there are several reasons why using a broker is advantageous.
To put it in perspective, it’s similar to going to a shopping centre and walking into the first store you see, trying on the third item you come across, and purchasing it because the salesperson was persuasive and the process was simple. But what if the trousers you bought were outrageously expensive, or the dress you selected had defects and holes? It’s like walking into a car dealership and buying the first car you test-drive without realising there’s a newer model available down the street at a lower price.
A broker can offer several advantages over simply relying on your bank to handle your financing needs.
- We offer you genuine options and secure the best deal possible
- We understand the importance of having a wide range of options to choose from, which is why we collaborate with various lenders instead of limiting ourselves to just one.
- We may also negotiate with lenders to get you a better deal, saving you money and hassle.
- We understand how time-consuming and stressful financial matters can be, which is why we are here to help you do the legwork
- Our ultimate goal is to make your life easier by saving you time, reducing stress and getting things done as quickly as possible.
We’re here to help make it easier
In case you encounter any confusion or require further clarification, please feel free to get in touch with us via email or phone. Our team is always ready to assist you with any queries you may have.