Getting The Most Out Of Refinancing Your Loan
If you think a mortgage is a “set and forget” type of deal, think again!
A refinancing loan, or a refi, is a type of loan that replaces your current home loan with a new one that has more desirable terms for you.
Refinancing loans are more simple than they can first sound. They mean that you don’t have to stick with your home loan if your circumstances have changed or interest rates have dramatically dropped. You can exchange it for a better deal!
You can refinance with your current loan provider or switch to an entirely new one, which is great news for those who know that variety is key to getting a great loan.
There are loads of reasons why people think about refinancing, but essentially, if you no longer feel like your loan is suitable for you, refinancing is a great option to look into.
The most common reason why people choose to refinance is the opportunity to secure a better interest rate. As interest rates change (and as the latest global pandemic shows they can drop dramatically!) borrowers can potentially save big with lower interest rates, lower monthly payments, or a different loan repayment period.
You may also consider refinancing if you wish to consolidate your debts. This financial management strategy is very common if you have several loans from different banks and run the risk of losing track of your payments, therefore paying more in the long run from missed payments or late fees. Putting all your various debts into one easy loan makes your finances more manageable.
Another reason why you might refinance is if your situation changes. This can be both positive and negative in the way it affects you. Getting married, changing jobs, or an inheritance can uplift your finances and allow you to pay larger monthly amortisations. Likewise, a death in the family, sudden illness or disability, or losing your job can impact you negatively, leaving you with the need to extend your loan term with smaller monthly repayments.
By refinancing, borrower’s can also access their home’s equity for a new loan to purchase a new property or start a business. It’s a great way to make your home loan work better for you!
As with every financial decision, you need to look at your current loan repayments and figure out if the long term savings outweigh the short term costs. Refinancing your loan to take advantage of lower interest rates, for example, may be costly if there is a discharge fee, early exit, or cancellation fees involved with your loan. There are also application fees to consider for your new loan.
A commonly overlooked factor is the need to get your home re-evaluated depending on how old it is and how long you’ve had your current loan for. This can be a slow process that can be inconvenient for full-time workers who may need to take time off to accommodate this. Or, you might be planning on moving to a new place soon. In which case, paying more on your loan in the short-term may not be suitable.
In short, you need to weigh the short term costs with your long term savings to see if it not only balances, but provides profits to you. Refinancing only to break even may not be worth it.
It is always a good thing to keep your options open and be proactive about your loans, even if you decide not to refinance. When your situation changes drastically, you need to stay on top of your finances to ensure you make the most of favourable rates or don’t fall into debt.
Your loan provider will never tell you about a better deal unprompted. Market rates affect everyone differently, so speak to your loan provider or a mortgage broker to see if there are better deals out there for you.
If you think a mortgage is a “set and forget” type of deal, think again!
If you’re thinking of refinancing, there are many things to consider before committing to a fresh loan.
A refinancing loan is a type of loan that replaces your current home loan with a new one that has more desirable terms for you.
There are many myths about refinancing, but there’s no reason to believe any of them.
If you think a mortgage is a “set and forget” type of deal, think again!
If you’re thinking of refinancing, there are many things to consider before committing to a fresh loan.
A refinancing loan is a type of loan that replaces your current home loan with a new one that has more desirable terms for you.
There are many myths about refinancing, but there’s no reason to believe any of them.
*This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. Interest rates displayed are dependent on qualifying for a home loan with your chosen Bank. We cannot guarantee clients will avail the advertised rate.
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