Are you thinking about refinancing your mortgage but are unsure if it is the right option for your personal circumstances? Unfortunately, there is no easy answer as there are many deciding factors you will have to consider. There is so much advertising out there about cheap interest rates but those loan products may not be suited to you.
Before refinancing your mortgage, consider exactly what your goals are. Are you looking to reduce your monthly mortgage payments? Or are you hoping to pay off your mortgage faster? Below we have put together the many benefits associated with refinancing your home loan
1. Refinance to Shorten the Term and Reduce the Total Interest Paid on Your Loan
More than likely you took out a 30 year mortgage and you still have 20 plus years left to go before paying it off. With record-low interest rates, you may find that refinancing to a cheaper rate and if you continue to pay the same amount you will cut years off your home and investment loans.
You should call your broker to get them to run the numbers for you and work out what the new repayments will be. It depends on the loan terms, the cost of refinancing your mortgage and the interest rate that you will receive when you refinance, it is possible for you to pay less in total interest. It is important for you to be thorough and accurate with your calculations of the costs associated with refinancing and calculate the total repayments to create an accurate result.
2. Refinance to a Lower Interest Rate and Reduce Your Repayments
As interest rates are at a new record low, if your mortgage is currently financed at a higher interest rate, it could be a great opportunity to consider refinancing your home and investment loans. You could save a considerable amount of money simply by taking the time to fill out the correct forms and gather the needed documents. Let’s say you have a $500,000 mortgage against your owner occupied property with an LVR of 80% or below, then you could have a 3 in front of your interest rate, that’s right rates are into the 3%’s now!
3. Get Free Money from the Banks
Who doesn’t like free money? With the current lending war going on, some lenders are paying up to $1,500 to refinance loans across to them for a minimum loan of $250,000. The average cost to refinance from a mainstream lender is approx. $500 which covers the lender’s cost and government costs to pay out a mortgage. Therefore, you will be $1,000 in front already just from the cash back, plus the interest rate savings which could be further $1,000’s in the first year and on-going.
4. Refinance from a Variable-Rate Mortgage to a Fixed-Rate Loan
If you currently have a variable-rate mortgage, perhaps you should look into refinancing into a fixed-rate loan. Interest rates are at a record low, although they will not remain this low forever. Locking into a low, fixed rate can protect you from rising interest rates in the coming years. Additionally, a fixed payment is easier to plan and budget for. The cheapest rates out there at the moment are for 2 year fixed rates which start from 3.74% for owner occupied loans. Most of us who have had a mortgage at least 5 years, would have been paying almost double this only 5 years ago in 2010. If locking in a long term fixed rate in the 3%’s is of interest to you, then we need to talk as there are some great deals out there at the moment.
5. Refinance to Cash Out Home Equity
For many, it is a highly tempting proposition to cash out on your property’s equity by refinancing your mortgage. In some circumstances, refinancing your home loan is a great financial opportunity, it may make financial sense to cash out some of your home equity in order to buy an investment property, renovate your property or just have a buffer of cash.
If you are thinking about refinancing to cash out your home equity your should always consider your personal situation and establish exactly what it is you are trying to achieve. Lenders will generally want to know what the cash out is for but if we can validate the reason and you can get cash out at around 4%, then it can be much cheaper than other forms of loans.
There are many benefits to refinancing your mortgage, but there are also many factors to consider. Most importantly, you will need to establish the pros and cons of your personal situation and act according to your best interest. With thorough research and planning and seeking expert help, refinancing your mortgage could be the best option for you and your family.
Contact us at Entourage Finance to discuss refinancing your mortgage and to find out whether it’s the right option for you!