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Home owners are a diverse group of people, and that means there is also a whole variety of reasons why you may be thinking about refinancing.
If you’re keen to secure a better interest rate or enjoy more loan features, refinancing your home loan can be the solution. Refinancing is also an opportunity to get control of debt or tap into any home equity you’ve built up.
If you’d prefer the certainty of repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Refinancing your home loan lets you do this. Or, you may decide you’d like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.
The most popular reason home owners choose to refinance a home loan is to secure a lower interest rate and reduce their monthly repayments. However, refinancing can come with some costs, so it’s essential to weigh up the savings of refinancing against the expense involved.
Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals.
Like many Australians you could have several debts – probably a home loan, a personal loan, and possibly even a credit card balance. Having multiple debts means juggling lots of different repayments.
Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you’re paying on multipledebts through the process of ‘debt consolidation’. It means folding several high interest debts into one lower rate debt – which could be your home loan – and this may reduce your total monthly repayments.
However, it’s important to note that debt consolidation can come with some downsides. It can turn a short term debt like a personal loan into a long term debt (your mortgage), and that means paying interest on the balance for a much longer period which could cost you more in the long run.
For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.
