When was the last time you reviewed your home loan? Refinancing or changing loans is often done to get a cheaper interest rate or a wider range of features. It could equate to significant savings and also allow you to pay off your home loan quicker. Best of all it is easier than you think.
There are lots of reasons. Here are just a few.
· Get a cheaper interest rate. Savings can be a big motivator.
· Change the type of loan like a sharp fixed rate, a variable interest rate, an interest only loan or a line of credit.
· Get more loan features like an offset account, ability to pay extra, fee free ways to access your redraw.
· Consolidate debt and pay out smaller debts with higher interest rates like credit cards and personal loans.
· Access equity for other things you want to do like renovations, go on a holiday or buying a car.
· Invest elsewhere. Use your equity to invest in property, shares or managed funds.
Refinancing costs and savings
If you are thinking of refinancing you need to work out if the interest savings over a few years outweigh the costs.
· Fees to close your existing loan
· Setup costs for the new loan
· Government registration fees
· Lenders Mortgage insurance
Mortgage insurance is a major reason why people don't refinance. If your loan is still above 80% of the value of the property, it will be levied again as it is lender specific. If the costs are too high in comparison to the savings, it may make more sense to stay with your current lender.