You could consolidate your debt
Many of us have multiple debts like car or credit card along with our home loan. Often our car and credit card loans have pretty high interest rates, meaning more out of your pocket.
Refinancing could give you the opportunity to merge your debts and potentially reduce the overall interest you’re paying, streamlining all of higher interest debts into one lower interest debt and reducing your monthly repayments.
The interest rate on a home loan is usually significantly lower than the other types of credit. Helping you to save on interest charges and pay debt off sooner.
You could release some equity in your current property
You may be thinking about joining the thousands of Australians that have invested in property, renovating your home or traipsing around Europe on that trip of a lifetime. With your current home usually being your most valuable asset, it only makes sense to release as much of the value in your home as possible.
Home equity is the difference between your home’s current value and the balance of your mortgage. For example, if your home is worth $600,000 and you have a mortgage of $200,000 remaining, your home equity is $400,000. That’s money that can be used to build wealth.
Not so long ago, the only way home owners could access their home equity was to sell up and upgrade to another property. These days, home loans are flexible and it’s possible to get access to the equity in your home without having to sell up. Reviewing your home loan can help you see exactly how much equity is available to you, and refinancing can help you access the equity to use for other things.
Your lender’s rate is no longer competitive
We’ll start with the popular one first. One of the main reasons people choose to refinance their loan is to get a lower interest rate, and put more money back into their pockets instead of paying the banks.
When done correctly, refinancing your home loan could save you thousands over the life of your loan, and free up cash now.
You could switch between variable & fixed rates
Another popular reason to refinance your home loan is to switch between a variable rate and a fixed rate. With a fixed rate, some want peace of mind. That is, knowing exactly how much their monthly repayments will be without the possibility of it changing for a set period is worth a slight increase in rate.
Conversely, 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.