While obtaining a mortgage might make you feel like you’re committed for the long haul, you’d be surprised at how simple it can be to switch loan types or lenders and refinance your home loan. Sure, there may be costs involved, but there may also be significant savings and benefits, so it still could be worth your consideration.
We’ve listed some signs that could indicate it’s time to evaluate your situation and consider refinancing your home loan.
The market has more favourable rates
Across Australia, home loan rates are currently at their most favourable level for consumers than they’ve been in years1. This is a hugely popular reason for many homeowners to refinance in pursuit of something better.
Home loan products are continually being improved upon in the face of serious competition between lenders. If you think you could find a better rate, research the market and approach your lender to see what they can offer you before taking up alternative options.
Interest rates are expected to rise
While it’s true that interest rates are currently at competitively low levels across Australia there’s no reason to expect this will last 2 Entering a fixed rate loan at this time could allow you to enjoy the benefits of today’s low rates (for the period of your fixed rate term) even if they do rise in the future.
You're thinking of renovating your home
Home renovations can be costly and for many people it’s often better to get them all out of the way in one go for convenience sake. Refinancing your home loan could give you the opportunity to access additional funds or take out a construction or renovation loan as part of the new arrangement.
You want to invest in property or other assets
Buying an investment property or another type of investment can be a great way to generate a profit in the long term.
You might also find that you have paid off enough of your home loan to enable you to access the equity you have in your home to use for investment purposes.
This kind of strategy can present considerable risks, so it might be best to seek some professional advice before you start down the path of refinancing.
You're looking to consolidate your debts
Dealing with several debts can make meeting your monthly repayments more challenging than if you have a single debt to pay back. Refinancing your home loan may enable you to consolidate your debts into one affordable monthly repayment and make expense consolidation more manageable.
Consumers should be vigilant when consolidating other debts with your home loan because this can cost you more as you are prolonging the length of your loan. For example, paying off a 5-year car loan with a 4% interest rate compared to 14.5% might look like a good idea. However, consolidating this with your home loan over 30 years might not be in your best interest if you end up paying more in interest in the long run.
To take full advantage of this option, it might be a good idea to make additional repayments to your consolidated debt as quickly as possible so you pay less interest in the longer term.
While a Loan Protection Plan can be a vital part of maintaining your financial security, not every insurance policy will allow you to stay protected while transferring to a new mortgage. In most cases, your cover will cease, and you’ll need to start again with your new lender.
However, with ALI, our Loan Protection Plan isn’t tied to your home loan. This means you can stay financially protected with us no matter which lender or loan product.
To find out more about our Loan Protection Plan or to speak with an expert, contact your local ALI-authorised mortgage broker, or alternatively, request your mortgage protection quote here.
Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.