Refinancing your home loan is a lot less hassle than it once was. It also often comes with very real benefits. Here are five of the most important ones to help you decide whether refinancing is for you.
1. You can reduce your mortgage repayments
Lending has become a competitive business and there are likely to be many financial institutions out there – both traditional and non-traditional – who are prepared to fight for your business. By refinancing your home loan you can often find a lower interest rate, reduce the fees you pay, or generally secure a better deal than the one you’re currently receiving. This means you could end up reducing your home loan repayments, sometimes quite substantially.
Refinancing could also give you the chance to access new home loan features, including offset accounts or redraw facilities.
2. You can pay off your home loan sooner
If you’re meeting your current mortgage repayments comfortably, refinancing could give you the chance to reduce your loan term. While that means you’re likely to face higher loan repayments in the short term, you should save yourself a lot of money in the long run by paying off your home loan sooner.
3. You can buy another property
Refinancing could help you buy an investment property, potentially even without a deposit. That’s because many lenders will let you use the equity you have in your home as security against another property.
By using the equity you build in each property to buy a new one, you can eventually create an entire property portfolio.
4. You can get the money you need to extend or renovate
Renovating or extending a property usually requires a lot of capital. And, unless you have cash reserves to draw on, refinancing may be the most cost-effective way to get hold of it.
While there are other financing options, such as construction loans, personal loans, or even credit cards, none can match the low-interest rates or flexibility of a home loan. By refinancing, you give yourself the chance to take advantage of this, potentially saving you money.
5. You can improve your finances
Finally, refinancing could help you improve your finances, especially if you currently have several different loans or personal debts. By refinancing, you could give yourself the chance to roll these into the one debt secured against your home.
This should give you the chance to access lower interest rates and means you’ll only have to make one repayment to meet instead of having to worry about paying down several loans. Although, you should always remember that this could mean you extend your loan term and need to pay more in the long run.
Refinancing can be a great strategy for using your home loan to help you get ahead financially. But changing lenders often come with fees and upfront costs, so it’s important you get it right. A mortgage broker can help you find a home loan that suits you.
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