Refinance your Home Loan to unlock potential
Looking for a way to save money? A home loan isn’t just a debt, it’s a great financial tool that you can use to build wealth and facilitate your lifestyle.
Refinancing your home loan means replacing it with one that better suits your current situation. Here are the top 5 reasons why you might consider refinancing your home loan.
1.Is my rate still current? In my experience, many people understand their monthly repayments and make sure they stick to their schedule. But they tend to pay less attention to their interest rate, which also has an impact.
Generally, your interest rate at the beginning of your loan contract would have been the best available based on your situation at that time. Over the years though, the interest rate market moves and new pricing discounts become available. If your interest starts with a 4, speak with a broker to find out how much you could save.
2. Equity Release
If you’ve had your home for a few years and you believe the price has gone up, you may have equity available to use. There can be many reasons why you would use this equity, such as: renovations, holidays, vehicle purchases, deposit for investment property, etc.
Be mindful that you are actually borrowing this equity, so make sure it aligns with your goals and objectives. A typical example is accessing existing equity to carry out renovations that will improve the value of your home. There can be different loan structures, depending on the type of renovations you are planning. This is an ideal time to consider other options as there may be an alternative lender that has a more suitable structure or interest rate options.
3. Debt Consolidation can be another great use of available equity in your home. Credit cards, car loans or personal loans are generally charged at a much higher interest rate than home loans. Refinancing your high rate loans into a low rate home loan can provide an opportunity to reduce your total interest cost and make one easy repayment.
Take care that you don’t stretch these smaller debts over the life of the 30 year home loan though, because you will pay more interest over time. Create a separate home loan split for the Credit Card/Personal Loan debt and set up a reasonable loan term replicating the term you are currently in. For example, if you had 5 years left on the personal loan, make sure the home loan split you are using to pay it off is also set up for a 5 year term.
4. The End of a Fixed Period
If you have been locked into a fixed rate that is due to expire, this presents a good opportunity to explore what is available in the market. Whether you want to enter into another fixed product, move to a variable product or even review the structure of the loan/s. It might mean staying with your current bank or changing lenders altogether.
Have your circumstances changed since you set up your home loan? You may be in a stronger credit and equity position to demand a better deal. Reviewing your home loan can allow you to change packages to suit your current lifestyle and tailor it for today’s needs, or simply changing your repayment frequency to pay off your loan quicker. Some loans are better than other loans for different reasons. One common example is changing your loan so you can add an offset to your loan balance. People use an offset account as a way to reduce their interest bill and keep savings in the bank. Equally as important, you may be in a stronger credit and equity position to demand a better deal.
Interested in learning more? Click here. Contact Aleks Naumoski, YBR Principal & Wealth Manager on 0433 534 005.