Once upon a time, back when workers had one or two jobs for their whole career, most people continued with their mortgage faithfully until they had paid it off. How things have changed! These days the average duration of a home loan in Australia is just 4-5 years before the mortgagee decides to refinance.
Consider the reasons for refinancing listed here. It might just be time for you to act!!
1. Getting a lower rate
It’s easy to become obsessed with the interest rates on mortgages and loans. The most common reason for refinancing their mortgage is to get a better deal and lower repayments. However, as well as the interest, you need to consider fees and charges as well as the features of each particular loan. You might have to pay fees for your current home loan, plus charges for taking out the new mortgage. Will you be better off in the long-run?
2. More flexibility
It’s important that you know exactly what your current loan terms allow when deciding whether or not to refinance. How flexible is your loan; is there a redraw facility; can you repay quickly; are there penalties for exiting the loan before maturity? Many people only discover the full details about their mortgage when it’s too late: when they try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do.
When you carry out renovations, it might make sense for you refinance to include an interest-only construction loan as building progresses. Once construction is over, you can refinance again to consolidate your total debt and minimise your repayments.
4. Home equity
In recent years houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.
5. Changed circumstances
Some people find they have borrowed more than they can comfortably repay, or their earning power has been reduced through sickness or job loss. They may be in danger of defaulting on the loan. Renegotiating an existing loan or refinancing with a new loan is often the best solution.
So is it time for you to refinance your mortgage? Talk to Fast Debt Help and find out why, how and when to get the ball rolling.