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Should you refinance?

In years gone by, homebuyers would stick with the same bank for the life of their home loan.  While this might be an easier option, you will likely end up paying far more in interest than you otherwise would, if you found a more competitive interest rate.

There are many reasons why people regularly refinance their home loans; and in doing so, benefit in many ways.  So, the big question is, should you consider refinancing your home loan?


Saving Money

As mentioned, if you are paying a lower interest rate, you are effectively paying less interest over the life of the loan.

At the same time, this money that you’re saving could be used to help pay down the principal component of the loan, meaning that you will also pay off the outstanding debt faster. This is another reason it’s worth looking at a more competitive interest rate.

On an average 30-year loan, you can end up paying just as much in interest as you do in debt repayments, so every little bit you can save matters in the long run.


Fixed or Variable

In the current environment, we’ve seen interest rates drop to record low levels, and many believe that the only way is up.

When you refinance your home loan, you’re effectively taking out an entirely new loan product. That means you can change all elements of it, including things such as fixed or variable interest rates or even whether to pay down interest only.

While everyone’s situation is a little different, it’s important to understand that you’re not stuck with a basic 30-year variable loan if you don’t want to be. In fact, when you refinance, you should also be looking for superior loan products that contain options such as an offset account, which also helps you reduce your interest payments and saves you money over time.


Access Equity

If you’ve owned a property for a reasonable length of time, it’s likely that the value of that property has increased.

By refinancing, it’s possible to access some of that equity increase and put it towards other things.

Most people use the equity to put down a deposit on another property or even to renovate their current home. The ability to access equity is one of the most powerful tools at the disposal of property investors and a big reason why you should look to refinance.


Debt Consolidation

The great thing about home loans is they come with some of the lowest interest rates you can get, certainly in comparison to things like credit cards, personal loans or even car loans.

When you refinance, it’s a great opportunity to roll any of those high-interest debts into one place and get a far lower interest rate.

You are effectively paying out those other debts and using the equity in your current home to do it. In the long run, this saves you money, and it is money you can use to pay down your home loan.


If you would like to chat to us about refinancing your home loan and/or about property, please give us a call on 02 8004 2222 or book an appointment.


Although we are located in Crows Nest, we service clients from St Leonards, Artarmon, Wollstonecraft, Cammeray, Northbridge, Naremburn, Neutral Bay, Greenwich, North Sydney, Waverton to Willoughby and all areas of Greater Sydney.

PS  This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.