Home Loan Refinancing – What’s to Gain?
It is a good idea to check up on your home loan at regular intervals – once a year at least – to make sure that everything is humming along smoothly.
When you do so, ask yourself a series of questions.
Are you meeting your repayment obligations comfortably? Are you still convinced you are on a competitive interest rate? Is there nothing you would change about your mortgage, given the chance?
If the answer to any of these is "No!", it may be a good idea to think about refinancing your home loan.
While not a decision to be taken lightly, refinancing could help you to get your mortgage where you want it and put you in a better place to achieve other financial goals.
Here are some of the principal benefits that refinancing your loan could bring.
Find a more competitive interest rate
One of the most popular reasons for which homeowners choose to refinance their mortgage is so that they can get onto a more competitive interest rate.
With a lower interest rate you could lower your monthly repayment without altering the amount of interest you pay over the term of your loan.
Yet a loan isn't merely an interest rate, and it is by finding a more competitive combination of rate, loan fees and overall flexibility that you could end up with a better mortgage product for your needs.
Make repayments more manageable
One great benefit of refinancing your loan is that you can find a repayment schedule that is more comfortable to keep up with.
While it is possible that by combining a lower interest rate with a lower repayment, you may be able to still make savings, it is more likely that with a more relaxed repayment schedule you'll pay more interest over the length of your loan.
However that isn't the point if you wish to open up a bit of wriggle room in your monthly budget.
Extending the length of your home loan term can free up more money for life's many expenses.
Get aggressive in paying off your loan
Of course, if you wish to do the exact opposite – pay more off each month – you can refinance your loan so that it allows you to do just that.
Whether you wish to up your regular repayments, increase their frequency, or gain the ability to take more liberties in making lump sum repayments when you can, refinancing can help you do this.
Access your equity
While paying off a home loan it can often be hard to save for other goals, such as renovations, holidays or further property investment.
Once you have built up some equity in your home you can then use it as the basis of a home equity loan.
These are usually offered as line of credit loans, which allow the borrower to take out funds up to a certain limit at any time.
Many homeowners take advantage of this borrowing power to help them fund home improvements or the purchase of investment properties to set up another income source.
Refinancing can also enable you to consolidate other debts into one single repayment.
Before you do anything, get together with a mortgage broker to go over all of your options.
They can help you to make sound decisions about whether refinancing is for you, and if so, which strategy will best help you to achieve your goals.
This includes taking into account the costs associated with refinancing – an important consideration when assessing whether it is the right move for your situation.