Refinancing

+ Secure a better interest rate

One of the key reasons home owners choose to refinance their loan is to secure a lower interest rate and reduce their monthly repayments. However, refinancing can come with some costs, so it’s essential to weigh up the savings of refinancing against the expense involved.

+ Access additional home loan features

You may wish to explore a loan that includes:

• Flexible repayments – Making extra repayments at no additional cost to help pay off the loan sooner.
• Repayment holiday – A break from repayments or reduced repayments to cover career changes or breaks e.g. maternity leave.
• Offset account – Having a savings or transaction account linked to your loan. The balance of the linked account is deducted from, or offset against, the balance of your loan when the monthly interest charge is calculated.
• Redraw facility – Enabling you to withdraw any additional repayments you have made on your loan. Handy if you need cash in an emergency.
• Flexible rate options – Dividing your rate between fixed and variable components, or even making interest-only payments for a period.
• Loan portability – The ability to take your loan with you when you move from one home to another without the expense and hassle of arranging a new loan.

+ Switch between variable/fixed rates

If you’d prefer the certainty that repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Conversely, you may decide you’d like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.

+ Consolidate debt

Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you’re paying on multiple debts through the process of ‘debt consolidation’. It means folding several high interest debts into one lower rate debt – which could be your home loan – and may reduce your total monthly repayments.

However, it’s important to note that debt consolidation can come with some downsides. It can turn a short term debt like a personal loan into a long term debt (your mortgage), and that means paying interest on the balance for a much longer period which could cost you more in the long run. For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.

+ Access equity in your home

Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals. Find out more about accessing your home’s equity.