What is refinancing?
Refinancing is when you change your loan from one product to another. You can refinance away from your current lender or simply change loan products with them. There are lots of reasons that people refinance, and while it may seem confusing or time consuming, it’s usually easier than you think, especially with the help of a good mortgage broker.
Why do people refinance their home loan?
The main reason people look to refinance their home loan is ultimately to save money. What many people don’t realise is that your mortgage can be leveraged more then you think and with the help of an excellent mortgage broker, it can often be a fairly seamless and straightforward process.
Here are the main reasons why people refinance:
To reduce their interest rate
Switching to a lower interest rate is the number one reason people refinance their home loan. While it’s not an exercise that you want to repeat too often, we usually recommend revisiting your home loan every 2 years to ensure your loan is working for you and that you’re receiving a competitive interest rate.
If you’d like to understand what interest rate you could get right now, book in for a chat with our Perth mortgage broker.
To shorten the term of the loan
If there’s one thing that’s common to all of our Perth home loan clients, it’s that things are always changing in their lives. A new job or another change to their financial position, may mean you can afford to pay off your mortgage quicker than what you could afford to do when you originally took out the loan, or even since the last time you refinanced. This is where an experienced mortgage broker will come in handy to work out the overall savings, depending on your unique situation and ability to comfortably service (or repay) the loan. It’s about thinking about that’s possible and considering all your options to ultimately save the most money on your home loan.
To change the type of loan
This may mean changing from a variable rate home loan to a fixed rate home loan, or finding a loan that allows you to make extra repayments (some don’t). Perhaps, you’re looking to take advantage of an offset account or access a redraw facility. As mentioned, the loan you signed up for when you first purchased the property, or even after that, may not suit your current financial situation, and therefore it would make sense to change it accordingly.
To access equity and consolidate debt
Depending on when and where you purchased your property, you are likely to have experienced some growth in value. Perhaps you have made renovations, and therefore the property should be worth more. Equity if the difference between what you can sell your home for minus the balance owing on your home loan, and refinancing to an equity loan is a way that you can access this money.
You can read more about equity and how you can use it here.
To achieve values alignment
It could be the case that you simply want to choose to bank with a lender that is more aligned with your personal or family values. Many people are doing more research into ethical banking and how the banks operate in this landscape has become an important factor in who they have their home loan with. And with climate and net zero becoming a key focus in the media and politically, it may be important to you to ensure that your lender is walking the walk too.
This site outlines the banks that fund fossil fuels
There are plenty of other resources available if you’re interested in comparing banks on this basis including:
World’s most ethical companies
The Global Alliance for Banking on Values
How can a mortgage broker help me to refinance?
Refinancing may seem like an onerous task, but we the right help, it is usually easier than you think, especially if you’re using the services of an experienced mortgage broker. In fact, the most common feedback we hear from our Perth home loan clients, is “that was easier than we thought!” and that is what we love to hear, because we really are here to make it easy for you.
In a nutshell, it’s our job to help you understand what home loan will work best for you, to get clear on your refinance options and if it’s a good option. From there we help to compare home loans, and negotiate with lenders on your behalf. If you’d like to discuss your options Click here to get in touch today.
All lending subject to status and lenders criteria. Terms & conditions apply. This document contains general information only. Your own personal circumstances have not been considered and you should seek independent financial advice prior to making any decision on a financial product.
