It’s common for many homeowners to stick with the same mortgage they got when they first bought their home. However, there are some times when it can make good financial sense to refinance your home mortgage to another bank or lender.
Here are some situations where refinancing your home mortgage might be a good idea.
Secure a better interest rate
The interest rate you pay on your mortgage now might have been the best available at the time, but is it still as competitive as it should be? Competition between banks and financial institutions is fierce, so the rates offered change regularly.
Refinancing your current home loan could give you access to a more competitive interest rate. The result could mean saving thousands of dollars in interest charges over the life of the loan.
Repay your mortgage faster
If your current mortgage is locked into a fixed rate, you may be limited to how much extra you’re able to pay off over the minimum payment amounts. Yet choosing a different type of home loan could make it easier to pay off your mortgage faster.
For example, you might choose to switch to a variable interest rate linked to a 100% offset account. You’ll be reducing the amount of interest you pay each month, which results in paying more off the principal balance with every payment you make.
Access better loan terms
Not all mortgages are the same. Some home loans offer different features, inclusions and terms than others. For example, you might want the option of a redraw facility, or a linked offset account, or the option to make additional repayments when you have some extra cash. If your current home loan doesn’t offer the features you want, it might be worth refinancing to a more flexible option.
Over time the value of your family home may have increased. At the same time, you might have reduced your mortgage balance, which increases the amount of equity you have available.
Refinancing your mortgage allows you to unlock the equity you’ve built up to use for other things. You might use those unlocked funds to pay for home renovations or build an extension.
Some homeowners choose to refinance the mortgage of their family home to get into property investment. Buying an investment property can be a solid way to build wealth over the long term. Refinancing your home loan could unlock sufficient funds to cover the cost of a deposit and fees associated with buying an investment property.
Remember that refinancing your home loan could mean starting a 30 year loan term all over again from scratch. If you’ve already been paying down your mortgage for a few years and don’t want to extend your loan term, discuss your options with a good mortgage broker.