Like a lot of homeowners, you may have bought your house a number of years ago and have not revisited your mortgage. It is always a good idea to review your payments as it is a large annual expense paying interest rates on any loan.
Refinancing a home loan has its perks. Your situation may have dramatically changed: a higher valuation on your property or an increased salary actually lowers your risk. This encourages banks to offer a better deal. You may also want to shorten the term of your current loan, lower your interest rate, lower your monthly repayment, adjust your rate from variable to a lower fixed rate or refinance to cash out the equity in your own home.
There are many things to consider before refinancing your mortgage. Most importantly, you should weigh the pros and cons of your particular situation and act according to your own best interest. With some thorough research and planning, refinancing your mortgage could turn out to be the best thing for your family and for your wallet. Here are a few things to consider:
Who can do this?
Any homeowner can change their loan, although often a number of costs may make it harder. You will repay the old home loan and replace it with a new one. This is similar to what happens when you move home.
Why do people do this?
Asking for a new loan from a selection of lenders can get you a better deal. In most cases this will be for a lower overall interest rate as you become a less risky borrower over time. Other offers may include a selection of freebie financial products. On average, people change their home loan every 5 years in Australia.
How much can I save?
This depends on your current interest rate and the size of your loan. As an indication, reducing your interest rate from 4.5% to 4.0% on a $500,000 loan will save you $2,500 per year and over $12,500 in 5 years, which is almost a new car and far more than most associated costs!
What can I do to find out?
Firstly, everyone should ask their current bank for a better deal. You may be able to get a lower rate straight away. Huffle is slightly different, in that we help form groups of borrowers and aim to get buying power and reduce bank costs, which can be passed on to you! Find out more at www.huffle.com.au