I’m a great believer in remaining open to new opportunities and taking advantage of them when they stack up… and this is definitely the case when it comes to refinancing your home loan.
Now, there are many reasons why you may want to refinance your home loan. As a general rule, it makes sense to refinance your home loan when you are going to make considerable savings by completing the process, meaning that the amount of money you will save exceeds the costs involved with refinancing.
However, the choice to refinance really comes down to 3 key questions. If you answer yes to any of these questions, then refinancing is probably for you:
Are Interest Rates On The Move?
Are some lenders offering significantly lower interest rates, compared to the one you are now paying? If so, you may wish to consider refinancing with a new lender to reap the benefits of the lower rates. On the other hand, in times of rising interest rates, fixing your loan can protect you against future rate increases and save you money in the long run… even if you’re paying more initially than you would be if completely on a variable rate.
Are You Looking For Some Debt Relief?
Perhaps you’re finding it difficult to make your current repayments, in which case consolidating all your debts can make a significant difference to your monthly repayments. For example, personal loans typically carry higher rates of interest and they offer no tax advantages. It makes sense to consolidate your loans into one single debt and achieve a lower interest rate. You could consolidate all of your credit card debt(s) and personal loans at a 5% to 7% interest rate rather than say 13% to 22% interest from the credit card companies.
Do You Want To Own Your Home Years Sooner?
If you want to own your home years sooner, you should consider the newer loan products that will make your money work harder for you. With a traditional Principle and Interest (P&I) loan, you will spend the first 10 to 15 years paying the interest component of the loan without making a significant reduction in the principal. However, there are now many much better loan products on the market, which can make your money work harder for you, and significantly reduce the term of your home loan—without you having to make extra interest payments. These include: Revolving Lines of Credit, 100% Interest Saver & Mortgage Offset Accounts Redraw Accounts etc.
But How Can You Measure the Benefits of Refinancing?
Compare what you’re getting from your current lender with what you’re offered by any prospective new lender in these three areas:
- Total interest owing (i.e., the total cost of the loan)
- Monthly payments you’ll make
- Length of time required to repay the loan.
Interestingly, the best way to judge and compare different loans is to look at the total cost of each loan. This is the total amount of interest that you will pay over the period of the loan, plus any costs associated with refinancing. Also consider the amount of flexibility you have with paying off your loan as soon as possible, without incurring additional fees and charges.
If this is of interest to you, please feel free to contact us, we’d love to hear from you.
Until next time champions,
Harry
