Prior to the pandemic, there was a lot of stigma in refinancing your home, as it was casually believed to signify financial detriment. However, refinancing is one of the best ways to achieve financial freedom.
In 2021, there has never been a better time to consider refinancing your home. With the economy on the uptick recovering from pandemic losses, houses have increased in value significantly and will continue to into 2022.
If you haven’t considered refinancing, here are five reasons why you should.
5 Reasons to consider Refinancing
1. Lower Interest Rate
You can secure a lower interest rate and save on costs. Interest rates are as low as they have ever been and almost everyone who has refinanced in the last year has been able to lower their rate. While interest rates shouldn’t be the only reason you consider refinancing, Philip Lowe, the RBA Governor is urging people to shop around for a better rate as banks have had to drop their interest rates.
In particular, homeowners should consider changing from a variable interest rate to a fixed interest rate. This frees up more cash and provides you with a greater ability to forecast your finances. In one of our recent refinances, we were able to help our client secure a lower interest rate and release $160,000 to assist in renovating their family home.
2. Predictable Costs
Refinancing means you can opt into lower monthly payments as you are resetting the loan term. This is particularly helpful during these unprecedented times as many people have changed jobs or their lifestyle has changed in the last two years.
When you are refinancing you can choose a home loan with better features such as redraw facilities and offset accounts. These options provide you with more flexibility and allow you to access more equity in your home.
3. Pay your loan off sooner
When you refinance, you may find you can pay off your mortgage sooner. Many people opt-in for a thirty-year loan term and refinance at about the five-year mark to a fifteen-year loan term. This allows them to pay off their home much faster and generally, there is a slight increase in repayments but you are not paying as much interest in the long run.
4. Buy an investment property using the equity
As your house gets older, there can be some value additions you have made to the property that has increased its equity. For example, you may have added a pool or renovated it. Equity is still considered money and can be a great way to achieve lifestyle goals. One of the ways many homeowners use their equity is to purchase another property and use it as an investment. One of our clients had enough equity in their owner-occupier property to release $100,000 and use it as a deposit for a larger family home.
You may be able to do this yourself however it is better to employ a broker who will be able to:
- Value the property and determine how much equity is available.
- Review loan options and do a health check of your current loan
- Work out the costs of applying for a new loan and;
- Assist with loan applications and settlement.
At Melbourne Finance, we have a team of financial specialists who are able to assist you to buy that investment and furthering your financial freedom.
5. Get ahead financially
By refinancing, you can consolidate your debt and eventually improve your finances. Refinancing allows people to combine multiple loans into one loan. To free up cash and reduce your interest payments, the safest option is to consolidate your loans into your home loan. By doing so you may be able to access lower interest rates and you will have better control of your finances because there is only one monthly repayment. When you refinance and consolidate your debts you free up cash that you can invest in other parts of your life such as a new car, paying for high-quality childcare.
Talk to the experts of refinancing in Melbourne
There is always a cost when it comes to refinancing, so make sure to talk to the experts. At Melbourne Finance, we have been refinancing homes for a number of years and know the market well. If you are considering refinancing, fill out this enquiry form for a confidential chat.