Refinancing Your Home Loan
When was the last time you assessed your home loan situation? Refinancing or switching loans is often pursued to secure a more favourable interest rate or to access a broader range of features. This move can lead to significant savings and expedite the repayment of your home loan. And the process is simpler than you might think.
Why consider refinancing?
There are numerous reasons, including:
- Securing a lower interest rate, which can result in substantial savings.
- Altering the type of loan, such as transitioning to a competitive fixed rate, a flexible variable interest rate, an interest-only arrangement, or a line of credit.
- Accessing additional loan features, like an offset account, the ability to make extra payments, or fee-free redraw facilities.
- Consolidating debt by paying off higher-interest smaller debts like credit cards and personal loans.
- Tapping into equity for various purposes such as home renovations, funding a vacation, or purchasing a vehicle.
- Exploring investment opportunities elsewhere by leveraging equity to invest in property, shares, or managed funds.
When contemplating refinancing, it’s crucial to weigh the associated costs against potential savings over the long term. These costs may include:
- Fees for closing your current loan.
- Setup expenses for the new loan.
- Government registration fees.
- Lenders Mortgage Insurance (LMI).
LMI can often deter individuals from refinancing. If your loan balance exceeds 80% of your property’s value, LMI may be applicable again, as it is specific to the lender. If the expenses outweigh the savings, sticking with your current lender may be the more sensible choice.
