There are a number of reasons why refinancing your home loan can make good financial sense. If market conditions or your own financial circumstances have changed since you took out your home loan, it’s an option you should consider.
Here are our top four reasons why refinancing your home loan can be a good option.
1. You can potentially cut years of your home loan repayments
If you refinance to a loan with better terms, conditions and features, you can potentially own your home sooner. You can do this by:
- maintaining your current repayments when you refinance to a home loan with a lower interest rate.
- refinancing to a home loan with additional features such as an offset account. An offset account can reduce the amount of interest you pay on your home loan. For example, if you owe $350,000 on your home loan but you have $10,000 in your offset account, you’ll only be charged interest on $340,000, not the $350,000 that you owe.
Both of these strategies will help you to pay off your loan faster.
2. You can consolidate your high-interest debts
Home loans are a much cheaper form of finance than credit cards or personal loans. In other words, the interest rate you’re charged on your home loan debt is lower.
Consolidating your high-interest debts into your home loan could be a good strategy for you if each of the following statements describes your current situation.
- you have multiple debts (e.g. personal loans and credit cards);
- you have trouble keeping up with all your debt repayments and/or a bad credit rating.
- you have built up some level of equity (ownership) in your home over time via your repayments and/or your home increasing in value.
Consolidating in these circumstances allows you to take advantage of your home loan’s lower interest rate for
all your debts. It can also make your repayments easier to manage because you’ll only need to make one single repayment for all your debt, instead of juggling multiple repayments. If you’re disciplined with your future home loan repayments, you’ll improve your
credit rating and you could save yourself a substantial amount of interest in the long run.
3. It can allow you to unlock the equity you have in your home (get cash out)
If you’ve built up equity in your home over time, refinancing can help you to get access to those funds. For example, to finance a renovation or to use as a deposit for an
investment property. Refinancing to invest in capital growth and/or income-producing assets is an example of
good debt because it helps you to build your long-term wealth.
4. It can help you to avoid defaulting on your repayments
Finally, if you’re struggling to make your home loan repayments, refinancing can help you to lower your monthly repayments so they’re more affordable. There are two main ways to do this:
1) refinance to a loan with a lower interest rate.
2) extend your loan term.
It’s important to understand that lowering your monthly repayments will extend the time it will take to pay off your home loan. But that’s likely to be a better option than falling behind in your repayments or defaulting on them and having your home repossessed by your lender.
How we can help
At Fast Repay Home Loan, we can help you to
refinance your home loan and to implement strategies that will help you to become debt-free as soon as possible. We’ll take the time to understand your needs and goals so we can provide you with the best possible advice.
Call 1300 707 955 or email info@fastrepayhomeloan.com.au/backup to find out how we can help you pay off your home loan sooner. Secure your free consultation with a finance expert today.Â
