Many Australians are refinancing their mortgages to pay them off faster and save thousands of dollars in interest. In fact the average lifetime of a loan is only four to five years. But a decision to refinance should not be taken lightly. The following are key issues to consider.

Lower Interest Rate

Obviously every borrower would like to obtain a lower interest rate. But you should not become fixated on rates. There are also fees and charges associated with refinancing, such as exit fees from your current mortgage, and application and administration charges for your new loan. So you need to carefully calculate the benefits and costs involved to make sure refinancing is to your financial advantage.  A Your Local Finance broker will help you to uncover all the hidden costs so there are no surprises later.

More Flexibility

Borrowers often find they cannot achieve everything they wanted to do with their mortgage, or financial penalties may apply to do what they want with the loan. For example, they may want a redraw facility, which provides the capacity to pay additional funds into the mortgage and redraw it at a later date. This feature is not offered with many standard home loans, so refinancing may be the only option to obtain this facility.

Renovation

If you decide to renovate your home, you may want to refinance your mortgage and obtain a construction loan, which means that you only pay interest as the renovations progress. Then after construction is complete you could refinance again for the purpose of consolidating the total amount owing into one loan to minimise the interest you have to pay, while at the same time providing you with additional liquidity.  When you work with a Your Local Finance broker, we develop a strategy to help plan refinancing your existing loan in line with your renovation aspiration.

Home Equity

Many properties have appreciated significantly in recent times, as much as 50% in some cases. You can make use of this equity in your home by refinancing your mortgage with a home equity loan.  If you currently have a low-doc loan, this extra equity could be used to negotiate a lower interest rate or more favorable terms.  Contact your Your Local Finance boker to find out more.

Defaults and Debt Consolidation

If you are struggling with your repayments, you may have the option of refinancing to avoid defaulting on your mortgage and possibly losing your home. This is a common debt consolidation strategy.

To discuss any refinancing options, talk to Your Local Finance broker today!