Refinancing Your Home Loan
Refinancing refers to the process of paying out your current home loan by taking out a new loan, either with your existing lender or through a different lender.
We can help you determine whether you'll save money when you refinance. Working with a professional who has already established a strong relationship with several different lenders also allows you to access hundreds of offers. We are focused on putting your needs first and will assess your individual circumstances with the loans available.
When you take out a new home loan, you use some or all of the funds to pay out your existing loan. The new loan often comes from a different lender, but many people refinance with the lender they've been using for years. If you move to a new lender, that lender will take care of paying out your existing loan.
Home loan refinancing may be used for different reasons including:
Renovating your home or other home improvements such as a pool.
Paying off your debts such as credit cards by rolling them into your home loan.
Obtaining a cheaper rate, even if it means giving up a few loan features.
To raise cash for a purchase such as a car.
You want to switch from a variable rate to a fixed rate, perhaps because you can want to reduce the risk of higher repayments.
Refinancing can be a smart way to manage your money. Here are a few reasons why you may want to refinance:
To get peace of mind with a fixed rate
To access a lower interest rate and reduce your monthly payments
To gain the flexibility to pay off your loan faster
To consolidate credit cards, personal loans or other debts to reduce your interest rate and monthly repayments
To unlock the equity in your current property to finance a renovation, purchase an investment property or free up some extra cash.
Here's an example. Let's say Sally has a $300,000 loan repayable over 25 years. Her current rate is 5.2% and her monthly repayments are $1788.90.
If Sally can refinance to a loan with a rate of 4.5% a rate reduction of 0.70%, she can lower her repayments to $1,667.50, a saving of $121.40 each month.
Looking at the cost side of things, we'll assume Sally will pay $500 to refinance her loan. In this case it would take just over 4 months for Sue to claw back the costs through the savings she makes. That's not a bad timeframe. If it was to take several years to recover her costs, refinancing may not be worthwhile.
If Sally was to put the money she saved back into her home loan, she would shave almost 3 years off her loan, and save over $26,000 in interest.