Depending on when you obtained your home loan and your current finances, now may be the time to consider refinancing your home loan. Refinancing often allows homeowners to find better interest rates or more favourable terms.
Why should you consider refinancing your home loan? Here are some of the top reasons that homeowners in Australia choose to refinance.
Reduce Your Monthly Repayments
The primary reason to refinance is to reduce your monthly repayments. Interest rates can fluctuate each year, depending on the economy and the housing market. If it has been several years since you purchase your home, lower interest rates may be available. With the lower interest rates come lower repayments.
Pay Off Your Home Loan Faster
By reducing your monthly repayments, you may be able to pay off your loan faster. You can take advantage of the lower repayments to make extra repayments. Most of these extra repayments go directly to paying off the principal on your loan, reducing the overall length of the loan and allowing you to own your home outright sooner. Companies like Rams and Lendi have fantastic tools and resources online available for you to use.
Access the Equity in Your Home
Refinancing is also a suitable option for accessing the equity in your home. If you need to fund renovations, purchase additional property, or cover unexpected major medical bills, you may need to tap into the equity in your property.
Consolidate Your Debt by Refinancing
Refinancing also provides a way to consolidate your debt. There is a good chance that the interest rates on your new home loan will be lower than the rates on your credit cards or other unsecured debts.
With refinancing for debt consolidation, you can combine your existing debts into your new home loan, along with the remaining balance on your current home loan. By reducing the amount of interest that you pay on your debts, you can save money in the long run.
Should You Refinance Your Home Loan?
After reviewing the top reasons to consider refinancing, you may decide that refinancing is the right solution for your financial situation. However, there are a few factors to review before exploring your refinancing options.
You should first use a refinancing repayment calculator to estimate your new monthly repayments. Online lending platforms, like Canstar, Lendi or Rams, provide these tools to help you determine how much you will need to pay on your new home loan.
You should also assess your credit score and your Loan to Value Ratio (LVR). If your credit standing has improved since you obtained your home loan, there is a good chance that you may qualify for a lower interest rate for your new home loan. The LVR should be below 80%, which means that the remaining balance on your home loan is less than 80% of the property’s value.
If refinancing still makes financial sense, use an online lending platform to compare options from a variety of lenders. Comparing rates is a great way to ensure that you get the best value for your refinancing. Always compare options before applying to refinance your home loan.