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Mortgage & Home Loan Refinancing

Your home loan plays a big part in your life - it can affect your financial situation and your stress levels. This means that it's important to regularly monitor your finances and make sure that you're happy with your current home loan.

Home loan refinancing is a great way to access a lower interest rate, more product features and better customer service. However, before making the change it is important to consider whether refinancing is the right move for your personal situation.

Here are some of the circumstances that may help you decide when to refinance your loan:

  • Your interest rate is not as competitive as other rates in the market
  • It's an opportunistic time to switch to a fixed rate
  • A major change occurs in your financial situation
  • You want to access equity to pay for home renovations or to invest in another property
  • You've started to gain large credit card debts and want to consolidate

Debt consolidation

If your household has been feeling financial stress and pressure from other debts, you may want to consider refinancing your home loan to consolidate your debts into one monthly repayment.

For example, you may have a personal loan, student loan and credit cards that you can roll in together with your home loan.

The advantage of doing this is that typically your fixed or variable home loan will have a lower interest rate than the other types of loans, like credit cards that have rates as high as 20 per cent or more.

However, the key is to make sure you don’t lower your repayments once you’ve consolidated. By keeping your repayments at the same level you can pay your loan off faster.

Accessing equity

Another reason you may consider refinancing your loan is to access the equity built up in the home loan over a period of time.

You may choose to refinance investment property loans to free up some money. This can then be used to pay for home renovations or to invest in another property. With this strategy, just keep in mind that although your property portfolio will expand and grow in value, your loan term will also increase.

Other important considerations

There are some situations where refinancing should be avoided. For example, if you’ve already built a good relationship with your lender, chasing slightly lower rates is not recommended. Lower interest rates can mean less service so be careful when considering this option.

Other reasons why refinancing may not be a good idea:

  • You are already through most of the loan term. For example, if you've been paying your loan for 20 years already, refinancing to a longer loan term will reduce your payments in the short term, but cost you many more years and more money in the long term
  • Prepayment penalties on your existing loan may outweigh the savings from refinancing
  • Your credit history is not as good due to outstanding debts, making it less likely you’ll get a good rate
  • You've got an uncertain income over the period of the loan, such as work as a freelancer or contractor
  • Your loan balance is low and you’re not thinking of redrawing on available equity

If you're looking to refinance your mortgage and want to secure the best fixed interest rates in Australia, or if you're just looking to access some equity, talk to one of the Loan Specialists at resi today.

We strive to help you find the best home loan suited to your circumstances, and ensure that you're happy with your mortgage for the life of the loan.