No doubt by now you would have heard that interest rates remain at a record low. There’s never been a better time to refinance your home loan.
But what exactly does refinancing mean? And what benefits are in it for you? We break it down for you:
Benefit 1: Lower interest rate
Refinancing your home may allow you to access a lower interest rate. If you’ve had your current home loan for more than a few years, chances are you’re no longer on the best interest rate being offered on the market. Take a look at what you’re paying and if it’s not close to the 2% mark, then it’s time to explore this option.
Benefit 2: Gaining an offset account
Offset accounts can be a very useful feature for a mortgage. It allows you to save and spend money as per usual, but every dollar that you have sitting in the account offsets your loan principal. Therefore, the more money you have sitting in your bank, the less interest you pay on your mortgage.
Some lenders even offer multiple offsets which allow you to have up to 10 transactional accounts linked to your variable loan. This ensures every dollar you have is working for you and not the bank. This also allows you to manage your money more wisely in a similar way to the Barefoot Investors approach (-:
Benefit 3: Fixing your home loan
If you want the stability of knowing how much your repayments will be for a set amount of years, then fixing your home loan and locking in a super low interest rate could be the right choice for you.
By fixing your home loan you won’t be subject to higher repayments in the future when interest rates finally increase. Most lenders will offer a split loan, which could have a set percentage fixed and variable – so you can have the best of both worlds.
Benefit 4: Gaining extra cash
By tapping into your equity, you may be able to borrow a bit more money – money that you may not have had lying around. You could then use this extra cash to fund a renovation, buy a car, invest or pay off debts.
Can anyone refinance?
You might want to talk to your mortgage broker about your options. The first step is seeing what your current property is valued at in today’s market and assessing it against how much you owe on your home loan.
The last thing you’ll want is to end up paying lenders mortgage insurance again, which could cost you thousands. You should only ever refinance if there is a clear benefit to do so. The job of a good mortgage broker is to clearly demonstrate this and look after your interests first!!!!!
If you need some expert guidance on whether refinancing is the right move for you, especially if you’re in a unique financial situation, talk to your mortgage broker. Speaking to a mortgage broker is free and they can guide you through the process.