Refinance

Do you know how well your current loan stacks up?

Things change, and chances are since you got your home loan interest rates may have moved, and life has too.

Has the official cash rate changed since your current loan settled? Has the rate your lender is charging you changed? What about the fees and charges? Chances are the market has changed too. New products designed to attract borrowers are always being introduced, and lending appetites are an ever moving feast. Let’s not forget that things have probably changed in your life too since you took out the mortgage. Your income may have changed, and your expenses probably have too – your financial goals could also be different. Even though most loans are around 30 years in length, you may be surprised to hear that Australians often change their home loan every 4-5 years as they refinance. Refinancing is a chance to look at what’s out there and to check to see whether your current loan is still the right one for you. If it’s not, it may be time to refinance.

Why should you refinance?

  • Reviewing your home loan every year or two is a very good habit to get into
  • As the market and your circumstances change, the home loan that was just right for you then, may no longer be one that suits you now. You may be looking to save a bit of money, consolidating your debt or looking to unlock some equity you’ve built up in your home. Whatever the reasons, it’s a good idea to see what’s out there on a regular basis. But you should also bear in mind the long term costs of increasing your borrowings.
  • Lower Rates and Fees
    • Obviously the first question to ask is could you be paying less? A loan with a lower interest rate or less fees can be the simplest way to reduce your repayments. It means you can unlock a little more spending money, or better still, pay off more of your principal to pay the loan back sooner.
  • More Features
    • But it’s not all about interest rates. Sometimes the loans with the lowest rates also sacrifice features that are not only handy, but also save you money in the long run. For example:
      • Offset account. This is a separate account that lets you use the balance to offset the principal on which your interest is calculated. Simply having your pay packet deposited into this account can take time off your loan.
      • Flexible payments. Paying some more money into the loan if you have it is a great way to shorten your loan and save more in the long run.  This lets you easily access any extra funds you’ve deposited into your loan.
      • Flexible rates. Depending on what you think rates are going to do (go up, down, or stay the same), you can choose the type of loan that could save you money when they go down, or protect you if they rise.

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