Refinancing your loan has a number of benefits, but just like any major financial decision, you have to ensure that you are doing enough research and asking yourself the right questions. As mortgage brokers, we want to make sure that you get the right loan for the right reasons.
To get you started on your journey, here are three questions you need to ask yourself to ensure that refinancing is the right choice for you.
How much am I going to save?
If you are refinancing after a long period of repayments, you might find that you can improve your home loan interest rate. All those consistent, punctual payments to your lender mean that your credit rating will have improved. This reduces your risk, and your mortgage lender may be more willing to cut you a deal with your new refinanced loan.
This will also help you learn how much you will be able to readjust your budget as a result of your refinancing.
How am I going to use the capital?
There are plenty of ways to use the equity you have unlocked from your home. If you want to re-invest the capital back into property, you have two choices, mostly dependent on the amount of capital you received: either use that new chunk of change as a deposit on a second investment, or use the cash to update your current home or portfolio.
Either way, we would advise to make that capital work for you. A wise investment can help you achieve your financial goals sooner but refinancing to repay credit cards or to pay for household and personal expenses can mean it takes you longer to repay your home loan. Sometimes, accessing your equity for personal reasons is necessary or appropriate but if this happens regularly then you may find you home loan balance increases over time rather than decreasing.
How am I planning to manage the new repayments & have my circumstances changed?
Sometimes, refinancing is necessary because your circumstances change. If your long term financial plans have changed since you originally setup the loan then you should review the loan term. It may be that the loan term should be extended to reduce the repayments but this is a decision which should not be made lightly as this may mean it takes you longer to repay your home loan.
It may be that your income has increased since you first purchase the property and you may be able to increase the repayments to repay the loan quicker than you first intended. Either way it is worth reviewing your situation and financial goals when you refinance.
Completing the journey
Please call us anytime you would like to discuss refinancing or any change to your finances. We are here to help. We recommend that you review your financial situation with us every 2 to 3 years or when any major change happens.