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No one minds having extra money in their kitty. Especially if it comes off your largest expenditure – your monthly mortgage.

Thanks to the low-interest rates that have lasted the better part of the year, and the prospect of a rate hike in the future, many borrowers are looking towards refinancing their home loans – either for a lower rate or a fixed rate or simply to free up some cash.

 
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But how do you know it is the right time to refinance?

“A low interest rate is only one of the many reasons to consider refinancing. Often, the need to switch could arise from changing family situations or stem from an urgent need for money. Even if you don’t have any requirement, it is only wise to check your rate every two years, lest you find yourself paying precious dollars that could have otherwise been utilised to pay off that high-interest rate credit card debt or take a holiday,” explains Nathan, a mortgage broker with HashChing.


A home loan, tailored especially for you!

Just like every borrower is different, no two home loans are quite the same! When it comes to a mortgage, there is no one-glove-fits-all approach. In fact, many borrowers make the folly of choosing the lowest possible interest rate, without really knowing what they need, and end up paying much more than they should be for a home loan that does not suit their individual circumstances at all.

When it comes to your home loan, Nathan advises, it is pertinent to have one that is in line with your present and future financial goals. Thus, a better home loan deal is not one that offers a lower rate of interest, but also provides suitable loan options for the concerned borrower.

Probably, you’d like to refinance to consolidate your debts or move to fixed interest rate payments, for better financial security, if you are in the family way. You might also want to dip into the equity in your home to renovate the property or secure your children’s first home.

Unlocking equity could be one of the major factors for refinancing. Chances are if you bought your home with a high LVR loan, you are paying above the market rate on your home loan. However, with property prices soaring as they are, you might be surprised to find your home is worth much more than you thought and it could be worthwhile to unlock this equity to bring your interest rate down.

You could also tap into the equity in your home to increase your borrowing to consolidate other outstanding debts such as high-interest rate credit card loans and personal loans. This not only brings down the interest rate but also makes it simpler to manage your finances by rolling everything into a single mortgage repayment. However, remember that you might end up paying more interest on a credit card debt due to a longer term after consolidation. Thus, it helps to have the ability to make extra repayments on your home loan, so that you can get rid of the debt faster.


The cost of refinancing

Refinancing may not always be beneficial, considering the exit and switching costs involved. “Ideally, you should be able to recover the cost of refinancing in the first year of switching, so that it is ‘savings’ all the way into the future,” explains Nathan.

A professional broker could come in handy in such a situation, as an expert can crunch the numbers for you and help you make an informed decision, whether refinancing makes financial sense for you or not. Brokers are also better informed about ongoing home loan deals and have access to special discounts and refinance rebates that they can offer their clients to help maximise their savings.

Nathan advises that every borrower must compare home loan rates, and review their home loan, every couple of years.

You could always contact your bank for a better deal, but that could be limiting your options severely. HashChing’s Partner Brokers have access to home loan deals from over 60 lenders across Australia. They have verified experts who can compare rates and features to offer you choices that fit your personal and financial circumstances perfectly.

If you think you are paying extra, or you are paying for home loan features you no longer need, it is time to get in touch with a broker and consider refinancing your home loan.

 
By Vidhu Bajaj
HashChing Content Writer
 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.