For many of us, a home loan is one of the biggest financial commitments we make in our lives. However, for such a big commitment it’s something we tend to ‘set and forget’. Through different life and financial stages it’s important to assess if our current home loan is still working for us, and consider the option of refinancing.
1. You want to reduce your monthly repayments
A common reason for refinancing is reducing your monthly repayments. If you’ve noticed competitive interest rates in the market, you may be able to refinance to a new loan with a better rate. Lower home loan repayments equals more money in your pocket. Finding a loan that’s even a quarter of a percent lower might not seem like a lot, but in the long run, it could save you thousands.
Be sure to take a look at the comparison rates as this will give you a full picture of the interest rate combined with any fees and charges connected to the loan.
Check out our refinance calculator to see how much you could save by refinancing to People's Choice.
2. Your property has increased in value
If the value of your property has increased, you might be able to refinance your home loan and find a lower rate with home loan features more suited to your needs. It’s common for lenders to give lower interest rates to borrowers with higher equity.
3. You want more features
While a low interest rate is a large factor when choosing a home loan, there are other important features that could make a big difference over the life of your loan. You might be thinking about switching to a loan that allows you to make unlimited extra repayments, which in turn means you can pay off your home loan faster. Or maybe you’re interested in a loan that has a redraw facility, meaning you can access extra cash if you’re ahead on your repayments.
If you like the sound of consistent monthly repayments but also the flexibility of the variable features, you could consider a split loan. This is where you can choose a fixed rate for part of your loan and a variable rate for the rest.
You could also be wanting to link your loan and transaction account to help reduce the interest and time taken to pay off your loan through an offset account.
4. You want to renovate
If the time has come to renovate and you need some extra cash to cover it, you could consider refinancing. If your property has increased in value and you have enough equity in your home loan, you might be able to use this to help with the cost of renovation.
5. You want to consolidate
Consolidating your debts such as credit cards or car loans into your home loan is a great way to simplify and manage your finances. On top of that, it could help pay things off sooner, too. Some financial institutions offer fee waivers and discounts if you have all of your finances with them. Plus, that means less internet banking passwords to remember.
6. Your fixed rate period is expiring
If your fixed rate loan term is ending, this is a great time to consider refinancing as it means you may avoid paying a ‘break cost’ fee. Once your fixed rate expires your loan will automatically switch to a variable rate. You could consider moving to another fixed rate or it might be time to refinance and switch over to a better deal.
If you think refinancing could be right for you, be sure to check what fees could be associated if you move to another financial institution so there are no surprises.