There are many reasons why you may want to consider refinancing, but for most people, it comes down to looking for a better deal for your circumstances. Reviewing your mortgage frequently will not only ensure you stay on top of your own finances, but also across mortgage products and market fluctuations.
Let’s break down some the most common reasons you may want to consider refinancing:
I’m paying too much interest
You may wish to refinance in order to take advantage of lower interest rates offered by your current lender, or a new one. Since the new loan has a lower Loan to Value Ratio (LVR) lenders may offer better rates as the mortgage is perceived as lower risk.
I’m looking to consolidate debts
If you find yourself with multiple debts all charging interest, you may be looking to consolidate debts into your home loan. This is one of many reasons why people refinance – the advantage here is that generally you would pay a much lower interest rate on a mortgage than other debts such as credit cards. If you have enough equity in your property, you may be able to consolidate your debt on your home loan.
I want to change to a different loan type
Depending on your circumstances and the market, you may feel that paying more for a fixed rate loan gives you peace of mind, or you may decide that you’ll save more on a variable rate and can cope with any price increases.
My credit score has improved
Through consistently paying all your loans on time, your credit score may have improved since signing up for your current mortgage. This could mean home loan providers will offer you a lower interest rate, as lending to you is now perceived to be lower risk.
My personal situation is changing
If your personal situation had changed you may want to consider refinancing. This can include planning to have children, getting a promotion, or coming into some money – there are many different situations that may mean you want to review your home loan options.
I need money for…
If you need money, refinancing to borrow more may be an option if you have substantial equity in your home. The money could be for renovations, a new car, or even to put towards a bigger house.
I’m not satisfied with my current lender
If you feel your lender has treated you unfairly, they don’t provide adequate support to suit your lifestyle, or they have just fallen short of your expectations, refinancing can be an option.