Why refinance my home loan?
Home owners are a diverse group of people, and that means there is also a whole variety of reasons why you may be thinking about refinancing.
Reasons to refinance
Secure a better interest rate
One of the key reasons home owners choose to refinance their loan is to secure a lower interest rate and reduce their monthly repayments. However, refinancing can come with some costs, so it’s essential to weigh up the savings of refinancing against the expense involved.
Switch between variable/fixed rates
If you’d prefer the certainty that repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Conversely, you may decide you’d like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.
Access equity in your home
Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals. Find out more about accessing your home’s equity.
Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you’re paying on multiple debts through the process of ‘debt consolidation‘. It means folding several high interest debts into one lower rate debt – which could be your home loan – and may reduce your total monthly repayments.
However, it’s important to note that debt consolidation can come with some downsides. It can turn a short term debt like a personal loan into a long term debt (your mortgage), and that means paying interest on the balance for a much longer period which could cost you more in the long run. For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.