Are you looking to refinance your home loan? For some, there are easy ways to get the result they are looking for without refinancing. As a rule, when someone refinances their home loan it is to achieve one of the following goals.
When you are a mortgage broker you see just how much variability there is between the interest rates of lenders and even home loans offered by the same lender. By refinancing to a lower interest rate you are going to be able to lower your repayment. Generally, if your home loan is older than 2 years, then it is likely that we can find you a lower interest rate than your current one.
Extending your mortgage from 25 years to 30 years means that you can lower your repayment by paying your mortgage back over a longer period. The 30-year mortgage has become much more popular in recent times with interest rate rises because it helps lower repayments in the short term freeing up cash flow. The downside to extending your loan term is that you will pay more interest over the term of the loan. If your household budget is tight then extending your loan term to reduce your repayment is an option worth considering.
Similar to extending the term of a home loan switching from principal and interest to interest only means that you can lower your repayments in the short term which helps free up cash flow if things are tight. Changes in APRA regulations mean that in some cases the savings aren’t as good as they have been in the past, but we can certainly look at this option for you. Once again, the downside to this is that you will pay more interest over the loan term.
There are a lot of times when switching to a fixed rate makes sense. A lot of the time it’s about being sure of what your repayments will be while your rate is fixed. There can be considerable differences between the fixed rates offered by different lenders – so you often have to refinance in order to secure the best deal possible.
One of the best ways to free up cash flow in the short term is to roll your existing debts (credit cards, personal loans, and car loans) into your mortgage and pay it off at a lower interest rate. For savvy people who use that additional cash flow to make extra repayments on their mortgage, they can get ahead fast. The risk is that mistakes get made and additional loans get taken out after consolidation, eating up that freed-up cash flow.
As your mortgage gets paid down and your home appreciates in value, you can build up quite a lot of equity in your home sometimes very fast. It’s quite common to access equity to reinvest in improvements in your home that increase its value further or to use that equity for investments. Different lenders may value your property differently and this can lead to big discrepancies in how much equity you have. It becomes common to need to refinance to get you the best valuation to make your investment goals a reality.
One of the most common ‘life hacks’ we see as mortgage brokers is a client who refinances regularly to reduce their repayment but keeps their repayment as high as it was before they refinanced. Say someone was paying $4,004 per month before they refinanced and it went down to $3,705 after they refinanced. They’d keep paying the $4,004 per month as a way to make additional repayments. This will shave years of your loan term and save you many thousands of dollars in interest.
If you think your current home loan may no longer meet your current needs, then, by all means, reach out, then we can start to understand what your objectives are and how we can help you reach them. For a no-cost, no-obligation review of your mortgage and call 1300 661 211 or go to and fill out the form