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With interest rate rises headlining the news across the country, the option to refinance your home loan can save you money in 2023.
From mortgage refinance rates to switching lenders, the hot topics of conversation revolve around how to save money amid the painful squeeze of interest rate rises. Even without the current conditions, refinancing your home loan makes sense for a variety of reasons, including securing a better rate.
Many homeowners are feeling the pinch of higher interest rates, amounting to significant holes in the monthly household budgets. On top of this, it’s possible that your lender is charging higher interest rates for existing customers. Ensure that you compare your rate to the rate offered to new customers. If you can’t secure a lower rate with your current lender, look to refinance elsewhere, especially if your fixed interest rate period ends as your loan may revert to a higher interest rate than is currently offered to new customers. When comparing products, it’s important to consider other aspects, such as fees, to maintain competitiveness. For investors with interest only periods due to expire, consider extending to assist with cashflow, depending on your personal circumstances. If you employ a broker, like DPN, you have a professional who will oversee your property finance, checking on your loans periodically and negotiating better interest rates on your behalf.
It pays to consider that the type of interest rate you have may not be suitable for your current financial situation and goals. For example, while a variable interest rate made sense when you first took out a home loan, the set repayments of fixed rates could offer peace of mind in the current environment.
This also applies in the reverse, if the home loan features available with variable rates appeal to you. Refinancing your mortgage for a split rate home loan means a percentage of your interest rate is fixed while the other is variable. Look at all options to suit your personal circumstances.
Equity is the difference between the value of your home and the amount owing on your
loan. Refinancing home loans provides a way to access your equity to fund other investment properties or improve your property. Alternatively, this helps to improve your finances in a variety of ways.
Debt consolidation can alleviate the stress of managing personal debts, such as credit cards and car loans. Using your equity to pay down debt reduces overall payments each month and simplifies debt structure. Refinancing to consolidate debt into your home loan offers the ease of one monthly repayment that’s typically charged at a lower interest rate than other types of debt.
Simplifying and restructuring your home loan helps to manage repayments when your circumstances change. For example, if you’re nearing the end of a fixed term it might make sense to include a redraw facility to make extra repayments. For those with offset accounts that attract fees, consider if they’re worth the benefits. If you have investment loans or a property that’s just completed construction, ensure that your home loans are structured in a way that allows you to maximise tax benefits.
Has your income increased since you first took out a home loan? If you can make higher monthly repayments, consider refinancing to shorten your loan term and avoid fees for paying off fixed rate home loans early. Alternatively, refinance to lower your monthly home loan repayments on a longer loan term to help with short term cash flow.
While it shouldn’t be the only reason to refinance your home loan, experiencing problems with your lender adds unnecessary stress. Lenders need to be competitive across all areas, which means offering adequate customer service and flexible repayment methods. When combined with lower interest rates and fees, along with more suitable repayment options, switching lenders is a good reason to refinance.
As a general rule, you’ll need proof of your income and assets, as well as debts and expenses to refinance your home loan. A reliable payment history and a good credit score are favourable, as always. Having at least 20% equity in your home helps to avoid paying Lenders Mortgage Insurance.
To help with your decision to refinance your home loan, professional advice ensures a successful strategy is developed from the start on the journey to financial stability and success in the property market.
Refinancing your home loan provides a way to access your equity to fund other investment properties or improve your home.
The information provided is general in nature and should not be taken as advice as it does not take into account your personal circumstances, needs or objectives. Individual lender criteria applies to the approval of credit products. Terms and Conditions and lending criteria apply and rates are subject to change. Refinance home loan.
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