4 Reasons to Refinance your Home Loan

Why Should I Refinance?

Why should you refinance?

Thinking about refinancing but can’t make the decision yet? Let us help you understand why refinancing your home loan can be one of the best financial decisions in a tough time.

What does refinancing mean? – Refinancing a home loan means switching your existing home loan over to a new one. In most cases, a refinance will take you to another lender entirely for a greater advantage to you.

Why not just set and forget? Here are 4 top reasons home owners would consider refinancing their loan. See which ones may apply to you:

 

Refinance for a lower rate

This is the number one reason most Aussies refinance. To get a better deal.

Refinancing your home loan to a lower rate means you pay less interest on the loan. More money in your pocket, and less in the banks’!

In the current lending environment, switching from the average variable interest rate on an owner occupied loan of 3.47%^ to a Lend Ezy loan at 2.59% would save you $204.94 per month.  If you like big numbers, that’s $73,778.40 over a loan term of 30 years.

It pays to find out how much you could save on a lower interest rate. Calculate your repayments against a lower rate to find out for yourself.

 

 

Consolidate your debts

Did you know you can roll your debts into one under your home loan?

Provided the total loan amount is within the lender’s LVR requirements, you can consolidate other credit facilities under one roofs including credit cards, car loans, personal loans and more.

Instead of paying 20% interest on a credit card, 6% interest on a car loan, and 3.2% interest on your home loan, you could roll all those into the home loan and pay 3.2% interest across the board.

When consolidating your loans the home loan lender will pay out the debt facility and roll the debt into your loan.

You may need to consider payout figures and potential discharge costs, a small setback considering the potential savings to be made on a lower interest rate.

 

Increase your loan amount and take cash out

If your home has increased in value over time as you paid down your loan, you have the option to refinance for some cash out of the equity you’ve gained.  You can put that cash out toward a deposit for an investment property, home renovations, or invest into shares.

The amount of cash out can depend on your needs and the lender’s servicing requirements.

Let’s say your house value today has grown to $500,000 and you have $350,000 left on your current home loan. That’s $150,000 in home equity you have access to. Since most lenders allow up to 80% loan to value ratio (LVR) before paying Lender’s Mortgage Insurance (LMI), you could refinance your loan to $400,000 and get $50,000 cash out.

Consult a Finance Manager to discuss your options if you are looking for refinancing with cash out.

 

 

Restructure your loan

You can refinance to switch up how your loan is structured.

If you have a home loan with a single variable rate, you can opt to split that into part fixed part variable, or any other combination that suits your needs.

Most borrowers structure their loans this way to gain the advantages of both fixed and variable rates in one loan. The variable portion gets the advantage of unlimited extra repayments, redraw and possible rate drops (but also rate rises) where the fixed portion grants certainty in repayments and makes for easier budgeting over the fixed period.

 

 

If you think now’s the time to refinance, give us a call on 07 5619 7222 and our Finance Managers to make the switch to lending made ezy.

 

 

^Average interest rate on independent financial comparison site RateCity.com.au at time of writing