You’ve been with the same lender for a long time
For some, the thought of refinancing can seem all too hard, but if you’ve had the same home loan for several years, chances are you could be getting a better offer elsewhere.
You are looking to buy another property and want to present your situation in the best light
In recent times lenders have heavily scrutinised borrowers who have multiple small debts (credit cards, personal loans, Buy Now Pay Later facilities), so by not consolidating you may need to put your plans to buy another property on the backburner. Multiple debts can also negatively impact your credit score and your borrowing capacity due to how lenders assess the repayments.
You’ve never heard of a redraw facility or offset account
Nowadays, there are all sorts of loan features and tools to help you save interest and get ahead. Two popular choices are a redraw facility and offset account.
With a redraw facility, you can make extra repayments on your mortgage and save on interest, but still access funds should you need them.
An offset account allows you to deposit money into a transaction account that’s linked to your mortgage. Deposited funds are offset against your loan balance, reducing your interest.
Your situation has changed
If you’re earning more money, your financial situation has changed or have different goals to when you took out your home loan, these are all good reasons to consider refinancing.
Its getting hard to manage the number of debts you have
A popular reason to refinance is to consolidate debt. This involves refinancing your mortgage and using your equity to pay off your debt.
There are pros and cons to debt consolidation, so it’s important to speak to us about whether it’s right for you.
You want to access your equity
You may want to use your equity for a big-ticket purchase, such as buying an investment property or renovating your home.
Refinancing can help you achieve these kinds of goals.
The key benefit of debt consolidation is that it may help to reduce the amount of interest you pay. The benefit of refinancing your home loan to consolidate debt is that home loan interest rates are generally lower than the interest on other forms of credit, especially unsecured credit like credit cards and personal loans.
Refinancing your home loan means all your debt repayments will be covered by the one mortgage repayment. If you pay extra on your new, refinanced home loan after consolidating your debts, you’ll pay off your debts sooner and save money on interest compared to the interest you might have paid – say on a credit card.
Plus, if you have multiple types of debt with different interest rates and repayment deadlines, trying to manage your cash flow can be as much fun as pulling your own teeth! But consolidating your debt means you’ll only have to remember to make one repayment.
Depending how long it takes to pay off your debt, you could also end up paying more in interest and fees in the long-run compared to if you had just paid it off quicker at the higher rate. Talk to us and we’ll help you crunch the numbers and decide if consolidating your debts is right for you.
