What is refinancing?
Refinancing is also known as “switching” or “re-mortgaging. Basically, you refinance your existing loan to a new lender for a “cost benefit” or to get a lower interest.
There may be other reasons for this also. Refinancing home and investment property loans to a lower interest rate are popular in this low interest rate environment. Other reasons may include family circumstances, where a husband or wife might be considering starting a family and would like protection against interest rate rises or fluctuations. In this instance switching from a variable home loan product to a fixed rate product might be in their best interests. It all depends on your individual needs and financial situation.
As an example, and to demonstrate the potential costs benefit to a customer, refinancing a $450,000 home loan with an interest rate of 3.02% (Comparison Rate) to a home loan interest rate of 2.45%p.a. (Comparison Rate) could save you save you approximately $50,000 during the life of the loan.
As with any credit advice there are “pros and cons” to refinancing, however we will go through both sides with you carefully, in an easy-to-understand manner. Refinancing can save you money if done correctly, such as lowering your repayments, freeing up cash for other uses and making daily living more comfortable.
We suggest you speak to us to first to ascertain if you can qualify for a refinance. As your mortgage broker, we will recommend lenders and products who offer the low rates that suits your needs and, in some instances, offer a Cash Back Rebate for switching your loan. Yes, that right, some lenders will pay you to refinance your mortgage, so your costs of refinancing are paid for by the lender – It’s a win-win situation.
5 Best Ways to help you Improve Your Financial Situation
Benefits of Refinancing:
1Reduce your repayments.
2Pay off your loan sooner – By locking in a lower interest rate or shortening the loan term you may find the repayments remain the same, however you will save on fees & interest.
3Switch loan product – You can opt to change the loan structure, product and/or repayment type if your financial situation or goals have changed.
4Debt consolidation – Access equity to consolidate debt such as credit cards, personal loans, or get cash out to do a home improvement or just upgrade your motor vehicle.
5Budget – Complete a budget which takes into consideration all your income and expenses including loan repayments and credit card repayments.
It’s prudent to mention personal loans and business loans are also refinanced for the similar reasons mentioned above and some other reasons which we go into more detail in the relevant section of our website.
If we can’t get you a lower rate, whatever the reason may be, we may be able to negotiate a lower rate with your lender. Talk to us!
*Comparison Rate Warning: This comparison rate only applies to the example given. Different amounts and terms will result in different comparison amounts. The example is given assuming a customer refinanced a “like” home loan product and dollar for dollar amount of $450,000 over a 25-year loan term where the applicable comparison rate was reduced from 3.02% p.a. to 2.45%. p.a. on a principal and interest owner occupied variable rate loan without changing the remaining loan term or repayment. It does not consider fluctuations in future interest rates, increased borrowing, costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the costs of the loan. If a minimum loan repayment were made after the refinance, the customer saving would be reduced to approximately $36,000 over the life of the loan. This calculation does not take into consideration all refinancing fees and charges.