Typically, Australian home owners decide to refinance based on the available interest rates; as they may get a better deal than what they’re currently on. However, thats not the only thing to consider when deciding whether or not to refinance. If you are considering it, it’s important to see all of the reasons to do so, as well as other options available; so you can make the best decision.
Homeowners usually begin to look around for a better deal once they’ve been paying off their loan for a little while and are usually interested in finding a lower interest rate to try and lower the repayments. Some of the benefits of refinancing are listed below:
- Lower repayments – the major reason. With a lower rate, comes lower repayments. This enables you and your family to have more disposable cash in your pocket each month for other things you may need or want.
- Changing your loan period – You may be looking to extend your loan period to help lower your repayments each month too, or shorten your loan period so you’re debt free much quicker.
- Switching between variable and fixed – you may decide the other options suits your new situation a lot better; whether that be the flexibility of a redraw facility or to pay off the loan quicker, or the stability and security of knowing exactly how much the repayments will be.
- Tapping into your homes equity – refinancing gives you the option to tap into the equity at a lower interest rate; as opposed to taking our a personal loan at a much higher rate. This is usually used for home renovations, cars, family holidays or even paying for an expensive medial treatment – whatever you need the money for really.
- Debt consolidation – Rolling all of your debt (personal loans, credit cards etc) into one (your home loan) to enable you to manage it better at a lower interest rate, which could help you clear your debt much sooner.
- Saving – ultimately, refinancing is usually about saving yourself some money. Even the smallest amount each month can quickly add up and make a difference.
While refinancing can save you money in the short term; it can also extend your loan term which means you could be paying more in the long run. Be sure to calculate [or ask us to] the difference between how much you’ll be saving per month and how much extra you’ll spend because of it. If you can keep up with your original repayments, you may have a better chance of becoming debt-free sooner, depending on your situation/current interest rates.
Refinancing is not always as simple as it sounds, so be sure to seek professional advice so they can help you weigh up the pros and cons before going ahead.
Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.