Refinance for a better Rate
Refinancing a home loan is the process of taking out a new loan in order to pay out your current one and have your new mortgage fit your changed needs and circumstances. The reasons why someone would decide on a mortgage refinance vary. Perhaps:
- You would like to consolidate your debts
- Pay off your loan faster
- Get a mortgage with more flexibility and features
- Change to a different lender
- One of the most common reasons that people decide to refinance, however, is to get a better interest rate for their home loan.
Changing to a new rate
Paying off a home loan is a long-term process. Years, even decades, may have passed between now and when you first took out your mortgage. In that time, not only your personal and financial circumstances might have changed, wider economic conditions may also have altered.
For instance, while interest rates may have been relatively high at the time you initially applied for a mortgage, they may have fallen since then. If you refinanced your mortgage in order to take advantage of a period of particularly low interest rates, this could mean savings worth thousands of dollars in the long run – no to mention paying down your loan quicker.
Alternatively, you could use refinancing your home loan as a way of changing the type of interest rate. If you’re on a variable rate, for example, but interest rates are particularly low now, switching to a fixed rate could be advantageous, as it will fix this extra low rate for anywhere between a year to five years.
What should you consider when refinancing a home loan?
When you refinance for a better rate you need to be sure that the new home loan you’re going to get is actually a more favourable product. Crunch the numbers and be thorough – you don’t want to refinance your home loan only to find you should’ve stayed with your original mortgage.
Additionally, consider the costs of refinancing. If you end your fixed rate early, you could incur what’s known as a ‘break costs’, while if you’re switching lenders – and your loan was taken out before July 1 2011 – you could be charged an exit fee.
Along with this, your new mortgage could have registration fees and other ongoing costs that might diminish the advantage of a mortgage refinance. Be sure to weigh all this up before deciding refinancing your home loan is the right decision.
Your Home Your Mortgage:
A Home Buyers Guide
Your Mortgage Your Options:
A Home Owners Guide To Refinancing
From the moment you turn the key in the lock and take those first few steps through your new front door, the feeling of owning your own home is second to none.
Your Home Your Mortgage aims to arm home buyers and investors with essential know-how and proven techniques to ensure you avoid the common pitfalls of financing a property.
There’s no question the current mortgage environment is one of the most competitive in our nation’s history.
Refinancing provides Australians with a platform to get a better deal on their current mortgage, many of which may have been locked in some years ago at interest rates well above what’s on offer in today’s competitive market.