People take a home loan refinancing into consideration when they’re no longer satisfied with their actual home loan or when they want to make some house renovations.
Refinancing becomes a choice when your lending needs have changed or when your home loan is starting to pose difficulties.
- A refinancing has lower interests rates
This is the main reason why Australians take into consideration refinancing their mortgage. The easiest way to figure out if it’s worth the trouble to switch your home loan is to calculate if the costs of the refinancing will be paid off in the next two years.
Interest rates and fees can build up, so don’t just look at the lower interest rate that comes with a home loan refinancing. Take into consideration all the fees implied in the process.
- It’s more compatible with your renovation project
A home loan refinancing brings benefits to homeowners who desire to invest in structural renovations that aren’t compatible with personal loans.
A refinancing allows you to use the equity in your property as collateral. This is an option only if the value of the house outpasses the cost of renovations.
Some home loans don’t offer the option for a construction loan, so you may just have to go into refinancing in order to find one that fits your needs.
- Consolidating debts is a good option
A home loan interests rates are lower, and this is way many people add their personal loan or car loan to their mortgage. Dividing the payments over the course of the next 25 to 30 years will ensure much smaller monthly payments, but raise the interest rates.
You could benefit from this option of refinancing if discipline and regular payments are something that you’re used to. You could add a personal loan to your house loan, but instead of paying it off for 25-30 years, choose to pay it over the course of the next five years. This will allow you to sort your personal debt faster and even save almost 75% of the interest rate that you would have spent by prolonging the payments to suit your house loan.
- A home loan refinancing offers flexibility
If you’ve come to the point where a fixed rate isn’t your best alternative, and you want and actually can pay out the loan faster, then a home loan refinancing is the alternative. Being able to pay according to your income will get you out of debt faster, and it also comes with the split facility, a redraw facility, and an offset account.
- When mortgage payments are too big
Sometimes, our finances can’t support the mortgage payments and we’re forced to look for an alternative that requires a smaller amount per month. Even though the interest rates could go higher, there are times when our budget isn’t able to cover the payments, so a home loan refinancing is in order.
A home loan refinancing comes with advantages and disadvantages, so before taking the step, see if it will suit your needs!