If your interest rate doesn’t have a 2 in front of it, you may be paying too much.
Do you know the interest rate you are being charged on your mortgage? Have you stopped to consider how it compares to the current interest rate on similar products?
Refinancing your loan could give you access to a more competitive interest rate, especially if you have had a home loan for a few years.
Interest rates are currently sitting at historic lows, so, if your interest rate doesn’t have a 2 in front of it, you may be paying too much.
If you are unsure if you should refinance, we have listed a few reasons why people refinance below.
Your finances change as your needs do and your home loan is no exception.
If you’ve had a home loan for a few years now, it’s safe to assume your life has changed in that time. You may have started a new job, received a promotion, or gone through significant life changes such as getting married or had your first child.
Equally, you might be near the end of a fixed rate term or interest only period so now is a great time to find out what your options are.
Refinancing will allow you to ensure your home loan is still in line with your needs and goals.
As your needs and financial situation change over the years, you might be able to contribute more towards your home loan and get out of debt sooner.
You may also be able to structure your loan and get more out of it by accessing features such as a redraw facility or an offset account. By paying your salary into an offset account, you reduce the interest you pay on your mortgage each month. A redraw facility allows you to access any additional repayments you’ve made on your loan.
Alternatively, you could also switch to a simpler home loan with less features if you no longer require your current features.
If you purchased in an area that has experienced home value growth while you’ve been paying down your mortgage, you may have a substantial amount of equity in your home.
Equity is calculated by subtracting the remainder of your mortgage from the market value of your home, usually done through a home evaluation.
You could also draw down on your equity to help fund a renovation or upgrade your home. And, if you want to, you could use your equity to help purchase an investment property.