Refinancing your mortgage could save you thousands each month. But factors like the terms of your loan need to be considered so research is essential before switching.

 A refinance is changing your existing home loan with one more suited to your current financial needs and goals. And the Australian home loan and mortgage landscape is very competitive with many lenders reducing rates and offering cash backs for new customers. And so it pays to explore your options every few years to make sure you are still getting the best service, features, and rate. Here are 4 reasons a refinance might be needed:

  • To get a better deal on your current loan. (Imagine paying $200 each month less for the same thing!)
  • Renovate your property. (Imagine a new kitchen or bathroom!)
  • Save on interest payments when debt is consolidated. (Imagine getting rid of that credit card debt or car loan!)
  • Have extra funds for later. (Imagine freeing up funds for a special holiday or ….!)

Refinancing may be a great solution given the Reserve Bank of Australia (RBA) recently increased interest rates. Most banks offer better rates for new customers than they do to existing customers, so if you have had your mortgage for a few years, you are paying too much. Below we have listed the steps to help you decide if refinancing is right for you:

  1. Research: Check your current product features to rate and compare this to current market offers. There are different home loan products, ranging from basic to package type loans (which include offset and redraw to name some). Looking for a home loan with the lowest rate and fees plus the option to pay extra is one of the practical options that could help you pay off your loan faster.
  2. Identify your goals: This will help you determine which home loan products are the best fit for your situation.
  3. Understand the real cost of switching: Doing a cost-benefit analysis is a must. Taking into consideration exit and discharge fees, application, valuation and government fees plus any possible cashback offer mean you know the outcome will be right for you. If this is not your expertise, ask a reputable mortgage broker to assist you.
  4. Know your income and credit score: Lenders will consider how much equity you have and if property prices have increased since you purchased it, your debt-to-income ratio, and your credit score. If you have less than 20% equity in your home, refinancing may be costly, and you may be paying Lender’s Mortgage Insurance (LMI). This will add to your overall loan cost. You will need to understand when your monthly savings exceed your refinancing costs and whether you plan to retain the property long enough to benefit from refinancing.
  5. Book a consultation with Micah Finance Solutions: Our professional services can assist you with your refinancing plans. We help you work out what the best option is for you.

Schedule a Free Consultation today with our Finance Specialist.