4 signs it may be time to refinance
The pandemic has drastically changed the way we live and work. For some, there may have been big changes to their financial situation.
You may have changed jobs or been promoted or taken a step back. Perhaps you’ve saved up some extra funds during lockdown, or you may be struggling to make ends meet.
Maybe your goals have shifted – you’re no longer saving to travel to far away places, but instead want to renovate your home to be that perfect retreat during lockdown.
Here are a few reasons why now is a good time to review your home loan.
- You’ve been with the same lender forever. Interest rates are at historic lows and competition between lenders is fierce. There are plenty of red-hot deals out there, so it’s important to consider alternatives. If you’ve been with the same lender for years, chances are you’re probably missing out on a better deal elsewhere. If your interest rate isn’t close to 2%, then we need to talk.
- You have no idea what a redraw facility or offset account is Most home loans nowadays come with money-saving features like offset accounts and redraw facilities. These tools allow you to save in interest and potentially pay off your loan sooner. Offset Accounts wiare a transaction account linked to your mortgage and any money deposited into this account is offset against your loan balance, reducing your interest payable. Example: you owe the bank $400,000 and you have $50,000 in the offset account. Interest will only be calculated on $350,000. A Redraw facility allows you to make extra repayments on your mortgage and potentially save on interest. On top of that, you can still access the funds in future should you need them.
- Your personal circumstances have changed What’s changed since you obtained your mortgage? Are you earning more money? Have your living expenses changed? Do you have different financial goals? All of these elements need to be taken into consideration when choosing the right home loan for your needs.
- You’re drowning in debt payments If you’re struggling to cover multiple debt repayments, debt consolidation could be the answer. This strategy involves refinancing your mortgage and using some of your equity to pay off your debt.
The benefits are:
- Home loan interest rates are lower than other types of credit
- You’ll only have one repayment to meet
- You can spread the repayments out, so that they’re more affordable
- You may be able to make additional repayments and reduce your debt sooner
While debt consolidation is not right for everyone (in some instances, you may end up paying more in interest over the course of the loan), it’s at least worth investigating.
Like to know more?
Fornaro are here to review your home loan and check whether you’re getting the most competitive loan for your current financial situation and goals. Contact us today.