There are many reasons for refinancing a home loan, and these are based on individuals current financial situations and short to medium term goals. Below are some of the most common reasons:
1. Reduce repayments
Interest rates have most likely changed since you got your home loan. Refinancing to a lower interest rate will reduce the amount of interest you pay over the remaining term of your loan. This can reduce monthly repayments substantially.
2. Increased property value
Lenders will give you a better deal if your home equity is higher (20% and above). If you know that your property has increased in value, now could be great time to see what deals are available to you.
3. Expiring fixed rate period
Fixed rate terms are usually between 1-5 years. Once the fixed rate expires your home loan will go back to a variable rate. Variable rates do not usually have any discount – avoid this by refinancing to a fixed rate loan.
4. High repayments
If you can afford to pay higher monthly repayments, you may wish to refinance your home loan to a shorter term. Knocking just 5 years off the term of your loan can save you tens of thousands in interest.
5. Cash-out refinance
You can use the equity in your home to borrow money at a lower cost.
6. Refinancing for renovations
Refinancing to allow simple renovations is much the same as a cash-out loan.
If you are looking at structure renovations, you will be able to borrow the same amount as the value that the renovations are expected to add to your home.
7. Consolidate debt
You can refinance to consolidate other loans and debts into one loan. This may make the debt more affordable and easier to manage.
With a team of mortgage brokers, contact your closest office today for more information.