Should I refinance my mortgage?
When did you last review your existing mortgage arrangement? Chances are, if it’s been in place for a while and you’re comfortably making your regular repayments you may not have given it too much thought. Not reviewing your mortgage regularly can leave you disadvantaged when compared to other options in the market, and your current property loan may be costing you more than it needs to.
Let’s look at some of the main reasons why you should consider refinancing.
- Save Money. The most obvious benefit – refinancing your mortgage could offer significant advantages if interest rates have dropped but you are still paying a less competitive rate. The costs of refinancing your home loan always need to be factored in but using our mortgage repayment calculator to determine your refinancing needs can help you work through the process. Always make sure you compare apples and apples by looking at the comparison rate when considering changing mortgages to save money.
- Change your regular payment commitments. Refinancing provides you with the opportunity to reduce the amount of your regular mortgage repayments. Negotiating a drop in interest rates, or a lengthening in the term of the loan, can mean a reduction in your regular repayments taking pressure off cash flow commitments. Conversely you may find the opportunity through lower interest rates to maintain your current payments and speed up the loan repayment process by having a greater amount of your repayments allocated to principal rather than interest.
- Access Equity. If you have built up additional equity in your property then refinancing gives you the opportunity to access this capital for further investment.
- Debt consolidation. If you have a variety of secured or unsecured debts then you may want to consider bringing them together under one loan to save on interest costs or simplify your cash flow.
- Change of Needs. Financial circumstances change and the reason you took out the original debt may no longer be your priority. You may decide you want to replace a mortgage with a revolving credit facility or offset account for example, giving you greater freedom to offset surplus cash against your mortgage as required and redraw it again when necessary.
- Alter from one type of rate to another. Changes in interest rates will often dictate whether a fixed or variable rate is the ideal for you. When interest rates are falling it helps to have a variable rate to take advantage of further interest rate cuts, but should you feel the market is about to turn then locking in a fixed rate can provide longer term savings should rates start to increase. You should always consider how long you need the loan for before fixing rates as you may face additional costs for breaking it early.
- Change of lender. You may feel your current lender or mortgage broker are not meeting your needs or don’t seem to value your business. This is an important relationship and you need to feel comfortable you are being understood. Refinancing with another lender or mortgage broker who more thoroughly understands your investment strategy and is willing to offer stronger support could be a wise move.
Once you’ve determined your reason for refinancing the process of determining the right time to do it becomes easier. As mentioned you always need to consider the costs of refinancing, particularly any break costs to exiting your existing mortgage.