Benefits of Refinancing basically come under three headings
1. Improving your position
Improving your position involves time, and favourable market conditions.
Time, being the time passed since the start of your current home loan.
Favourable market conditions, we would hope that the result of; means an increase in property values. Traditionally, the property market gives us the capital growth that can unlock equity to use in a myriad of ways. This equity can be used to source another property, maybe an income earning Investment property; maybe help your children with a parental or family guarantee, enabling them to purchase their first home. Just to name two worthwhile benefits.
Of course, the greater the period time, usually results in the larger the amount of principle you have been able to pay off that home loan. Also leading to more equity.
2. Consolidating debt(s)
Let’s be honest, most of us at some time or other get that credit card, personal loan, hire purchase, or just an expensive store purchase. All of these come at a cost at some point in time, and usually at an interest rate greater than home loan rates.
Extra payments from the above, can lead to budget difficulties, home life stress; etc..
What better reason to enquire with your broker, if it is at all possible; to roll all of the above into your home loan at better rates. It makes good dollars and sense.
3. Saving interest, paying off your loan quicker
The first thing I tell my clients is to make sure you switch to Fortnightly payments.
Most new home loans require the first repayment to come one month after settlement.
But as soon as that first repayment has happened, switch to fortnightly; and save not only dollars, but reduces the average 30 years home loan by 2 years.
The other strategy to employ is making extra repayments no matter how large or small; as every dollar will impact on your total interest bill.
Keep reviewing your statements every quarter, and check the interest rate being applied. If your lender creeps your interest rate upwards over a couple year period, negotiate; or ask your broker to negotiate for you. If they don’t come to the party, don’t rest on your laurels; approach your broker for a better deal. It’s your money, so make it work for your wealth creation, not the lenders.
Your friendly mortgage broker,
Terry