In the last few years, especially more recently, we’ve seen the global housing market change drastically. It is becoming more difficult for the average person to afford a home, or manage the payment on the one they are already living in. And whilst interest rates may be pausing in the short term, the average homeowner must do what they can to boost their saving power whilst juggling a mortgage – just in case additional rate rises are on the horizon for you and your household.
Thankfully there are many professional and experienced financial advisors out there these days who can help provide some much-needed guidance for both owner occupiers and investors alike. If you have found that it is becoming harder to make your monthly mortgage repayments, it may be time to look at refinancing your home loan, as doing so can have a number of positive effects.
Continue reading below to learn more about how refinancing your home loan can benefit you and your family moving forward.
Your loan’s interest rate is a major factor in dictating how much money you have to pay towards your loan each month, along with how much of that money is going towards the principal balance. The length of your loan heavily factors into this as well, but your goal should always be to obtain as low of an interest rate as possible.
Take the time to talk to your current lender, and see what options are available to reduce your current interest rate. As it’s safe to assume that many of us would want our home paid for sooner rather than later, any reduction in interest is going to help you pay off that principal balance faster, ensuring the best possible route to minimising your mortgage promptly.
While banks and other lenders are not the old boys club with handshakes like they used to be, loyalty to your lender can still go a long way when refinancing your home loan. If you have been with your lender for a long time, and have a positive payment history with them, then we strongly recommend taking the time to meet with them formally, just to see what they can do for you.
Even in this modern age, loyalty may not have the same definition, but it is still usually cheaper for a company to retain a customer than find a new one. So use this to your advantage when talking with your lender, and communicate that you are aware of your real value as their loyal customer.
The years of working steadily and paying your bills have to account for something, and it certainly does when you have been paying towards the principal of your home loan. If you have more than twenty per cent equity in your home, it will naturally allow you to be in a stronger position for negotiating a better deal that will benefit you moving forward.
Along with this, if you are in a position where your home needs some upgrades, you can use your home equity to extend a line of credit along with your refinanced mortgage. This is obviously going to add to the overall principal of the loan, but it can be very beneficial in the right circumstances.
Whilst you’re already holding your lender hostage for a lower interest rate and a bunch of cash, why not take this same opportunity to try and get some more value out of your refinancing endeavour? In other words, this is a great opportunity to add features to your existing mortgage that you may not have already. And this rings especially true for homeowners who are still on their first mortgage without having sought refinancing in the past.
Remember that refinancing allows lenders to secure new business – even if the number of existing homeowners climbs higher in your local property market. As a result, it’s safe to assume that you will never get the best deals and features as a first-time mortgage holder. When you refinance, however, you may be able to access features (i.e. redraw facilities) that you may not have been able to enjoy from your initial mortgage.
Depending on what type of interest rate you have on your current loan, it may be worthwhile to look into what a change could offer. Some mortgage holders are on a fixed rate, variable rate, or even a split rate that combines the two. And depending on the state of the market and current interest rates, you may find that moving from a variable rate to a more conservative fixed rate could boost your saving power.
While your lender can’t predict the future, they would be able to give you some advice on what each type of rate could do for you, so be sure to consult with your lender or a trusted broker when looking to evaluate your current mortgage type. And of course, remember to consider the unique features that accompany your mortgage type, and what you might have to sacrifice in order to move to a fixed rate home loan.
It never hurts to shop around for anything you need in life, and this includes your home loan. While you don’t want to jump at the first bank that offers you something, it could be beneficial to see what deals other lenders have available.
If you can find a deal that surpasses anything your current lender can do, it may be worthwhile to consider it. There can be some costs involved with switching lenders and refinancing loans, so take the time to weigh all the pros and cons before making any major decisions.
When it comes to your financial future, remember that there’s no need to rush into anything without thinking. Take the time to look at what your original lender has to offer, as well as what others in your area can do. The goal of refinancing your home loan is to pay it off faster and live more comfortably, so always keep this at the top of your priority list. Rushing this type of decision is ill-advised, so ensure that you give all your options a fair chance.