The Benefits of Refinancing
Your Mortgage

There are many reasons why you might be thinking about refinancing your mortgage. Maybe your situation has changed since you first took out your home loan. Refinancing would give you the chance to switch to a new loan product that better suits your needs.

Perhaps interest rates have gone down, or the banks are offering strong incentives to customers who refinance with them. Either could be an opportunity to see if you could save some money. No matter what’s motivating you to think about refinancing, there are many potential benefits to be gained from taking out a new loan to pay off your old one.

Here’s just a few reasons why it might be a good idea to refinance your mortgage.

1. Lower Your Mortgage Repayments

This is probably the most common reason why people look into refinancing. If you can get approved for a new loan at a lower interest rate, you may be able to reduce your monthly repayments. With less money going towards your mortgage, you’ll be able to ease up the budget and have more cash to spend on what you enjoy.

Just remember, if there’s less going toward your mortgage each month, it may take you longer to pay off your loan. Even though you’ll be spending less upfront, you could also be accumulating more interest over time.

2. Make Use of Your Home Equity

As you pay off your mortgage, you’re gradually building more and more equity. Your home equity is the difference between the value of your property and how much you owe on your loan. It’s basically a dollar figure that represents how much of your property you own versus the bank. When you refinance your mortgage, you have the chance to access that amount and put the money toward something else.

Renovate your home

If you’re looking to make some upgrades to your home, you could look at refinancing to get the money you need to do your renovations. It’s a good way to use your equity to build even more value into your property.

Buy another property

Thinking about getting an investment property or a holiday home? You could use some of your equity as a deposit to put towards buying another property and put your home as security against the new loan.

3. Consolidate Your Debt

It’s easy to find yourself with multiple credit cards and personal loans on top of your mortgage. When you consolidate your debt, you’re essentially bundling all of these different lines of credit into one, single debt. Not only does it make it easier for you to manage your total debt amount, but it also gives you the chance to lower the interest rates on what you owe.

Credit cards and personal loans tend to have much higher interest rates than home loan products. By refinancing and rolling all of your debt into your mortgage, you could end up saving in the long run.

4. Find a More Suitable Loan

There are so many lenders out there offering different types of loans. While one loan product may have been ideal for you when you first set up your mortgage, you may need a different set up further down the track. Refinancing gives you the opportunity to move to a new loan with a structure that better suits your current needs and future goals.

Switch Your Interest Rate

Your existing mortgage may be set up with either a variable, fixed or split interest rate. As the names suggest, variable rates can go up and down with the market, while fixed rates are locked in for a set period of time.With a split interest rate, part of your loan will be fixed, and the remainder will be on a variable rate. Depending on your situation and what’s happening in the market, it might be good for you to refinance to a loan with a different type of interest rate.

Change Your Loan Term

Refinancing can lead you to reduce your repayments and increase your loan term, but you could also switch to a loan that will help you pay off your mortgage faster. A loan with a lower interest rate, an offset account or higher repayments could help you bring down your debt in a shorter period of time.

Access Extra Loan Features

Refinancing can also allow you to take on a new loan with extra features. Offset accounts, redraw facilities and more flexible repayment options are just some of the benefits you may be able to enjoy if you switch to a new loan.

5. Take Advantage of Promotions

Banks will often have various promotions on offer to encourage customers to move their loan to them. Sometimes banks will also provide incentives to existing customers to help sweeten your deal and retain your business. Cashback offers, rebates, special interest rates and more are popular promotions that banks will often run for refinancing. Just make sure you take note of the costs and any fees associated with refinancing to make sure the incentive is worth it.

Thinking About Refinancing Your Mortgage?

While there are many benefits of refinancing your mortgage, it’s not always the right move for everyone. Depending on your situation, the potential gains may not outweigh the drawbacks. To get the most out of refinancing, you need to do it at a time that’s going to work best for you. If you’re not sure whether you should refinance, get in touch with the experts at Loan Monster.Our mortgage brokers can sit down and have a chat with you free of charge to help you make a good decision.

Contact us today and we’ll get back to you within 24 hours, even on weekends

* The information contained in this website should not be taken as constituting personal advice. We recommend that you seek professional assistance before acting upon any information provided or linked on this website