When you’re looking to refinance, there are several questions that pop up in your mind, such as, how do I refinance my home loan, how to compare refinance rates, which features to choose, and several others! However, the foremost question, which needs to be considered, is whether it is the right time to make the switch? Again, how do we define ‘right time?’ Is it when you’ve managed to get a cheaper rate of interest? Or when you feel that you have complete control of your finances?
Experts suggest that you should conduct a health check of your mortgage once in three years. This would help you in getting a clear picture of your requirements and financial status. Further, you should also keep an eye on the products being offered in the market. Listed below are some examples and scenarios, which can help you in arriving at a well-informed and prudent decision regarding the right time to switch loans.
When is it a Good Time to Opt for a Personal & Home Loan Refinance?
Whether or not it is a good idea to go for a loan refinance will primarily depend upon your personal circumstances. Ideally, it is worth taking the plunge if:
- You are getting a much cheaper rate of interest than what your current lender is providing you.
- You’re undergoing a change in your financial condition or lifestyle, for instance, marriage or a new job.
- There are other products in the market offering enhanced features, such as free redraws or additional repayments, which are not available in your current mortgage.
- You wish to change your type of interest so that you can enjoy savings in money, for instance, switching to a fixed-rate or split-rate, particularly, when there is a high propensity of increase in your existing rate in the near future.
When it is NOT a Good Time to Opt for a Home & Personal Loan Refinance?
There may be situations when loan refinance may not be worth it, such as:
- When the costs of closing the current mortgage and other fee are far more than the savings you intend to make through refinancing.
- When you have plans to sell your property soon and don’t intend to keep the loan for a long time; this would deter from making a considerable amount of savings.
- When the balance loan amount is small.
- When the value of your property has decreased or your LVR is above 80%; this would imply that you have to pay lender’s mortgage insurance, thus increasing your costs of refinancing.
5 Scenarios when Refinancing is Worth-Considering
1. Savings in money:
You’ve hit the bull’s-eye once you are confident that you would be enjoying massive savings in money through refinancing your loan. Of course, it calls for a thorough research on the loan refinance rates, mortgage features, and costs of refinancing. You can make use of a loan refinance calculator to determine the costs of making the switch, your future repayments, and the savings you will make by garnering a lower rate of interest. You also need to consider the features you would want to have in your new loan and ensure that you pay only for those which you truly need. A loan with the facilities of free redraws, free additional repayments, portability, and offset account, sounds to be the ideal option. Remember, you’ve nailed the right deal if the savings start paying off within the first two years itself!
2. Debt consolidation
If you already have a car loan, credit card loan, or personal loan, then consolidating all of them into the home refinance may turn in your favor. This is a good means of taking advantage of the lower rate of interest of a home loan. It will go a long way in helping you to repay your debt faster.
3. Renovating your house or building a new one
If you are pursuing to build a new house or renovate your existing one, then refinancing may be the best idea indeed. You could choose to take a construction home loan or a line of credit home loan. While the former is to support large structural renovations and building costs, the latter can help you to take up small aesthetic renovations. Going through the loan refinance process at this point of time will help you to access the equity in your property, which in turn, will aid in financing the construction/renovation costs. Further, it will also allow for enhancing the cash flow, which you would need in plenty during the construction/renovation procedure. If your existing mortgage does not offer construction options, it is time to look for a new loan that would enable you to draw amounts for funding the cost of building the property.
4. Availability of a feature-rich and flexible product
When you first took a mortgage, you may have selected a basic product, which would simply enable you to make your repayments on time, without availing any special facilities. New products with enhanced features keep coming in the market. So, after some years of repayment, when you feel that you are in a position to manage your loan in a better fashion, you can now look for a mortgage with more flexibility, in terms of an offset account, redraws, extra repayments, split facility, and more.
5. Finding it difficult to make your mortgage repayments
If you’re finding it difficult to make your repayments, then going ahead with a home or car loan refinance can help you extend the term, whilst reducing the repayments. You can also look for a more basic loan with fewer features as well as a lower rate of interest.
6. Change in lifestyle or personal circumstances
Your lifestyle can impact your borrowing and repayment capacity. If there’s been a change in your personal circumstances, say you’re getting married or planning to start a family, you may want to have a mortgage, which would perfectly suit your current lifestyle requirements, enable you to meet your repayments without facing any hardship, and allow you to create a contingency fund for unexpected health care expenses, tuition fee, and more.
How Does Refinance Today Help You in Making the Right Decision at the Right Time?
Understanding the refinance home loan meaning and its consequences on your personal & financial situations can be confusing and time-consuming! Further, when you manage the entire process all on your own, you would be raising your stakes of making an error in interpreting the loan agreement, or perhaps, your own borrowing capacity!
No matter what is your purpose of opting for a refinance, we at Refinance Today, can help you simplify your decision and ensure that you take the right steps at the right time!
Here’s a sneak peek on what you get when you hire us as your refinancing partner:
Interact directly with a dedicated mortgage expert
Your Refinance Today broker is your one-point-contact for all your refinancing queries and concerns. You receive a highly personalized service from an expert who precisely understands your circumstances & objectives, shortlists suitable products for you, and negotiates with the lender on your behalf.
Be assured that you will never miss a great deal
With us, you can always be assured that you’ll secure the best possible funding option that works for you and your requirements. You will never have to worry about missing out on a great deal.
Gain an insight on how you can save money and get more from your mortgage
Each of the components, be it the loan amount, rate of interest, or the features of the product, can affect your repayments. We can assist you in saving dollars and availing special facilities from your mortgage.
Reach your desired destination sooner
The road to finding a refinance loan, making negotiations, and managing the documentation may be a complex and confusing one. With us by your side, you can reach your destination in the fastest and easiest way possible!