Many homeowners only think about refinancing when their fixed loan term is ending. But there are other times when it can be a smart financial decision. Whether you’re looking to lower your interest rate, pay off your mortgage sooner, or free up cash for renovations, refinancing could help you achieve your goals. Here are five instances where refinancing your mortgage could be the right move.
1. To get a lower interest rate
If interest rates have dropped since you took out your home loan, refinancing could save you money by reducing your repayments and total interest costs. Refinancing means replacing your existing home loan with a new one, either with your current lender or with a different bank. Use a repayment calculator to work out how much you could save with a lower interest rate.
Tip: Remember to factor in any break fees if you’re refinancing before your fixed loan term ends.
2. To pay off your mortgage faster
If you can afford to pay a little more each month, refinancing to a shorter loan term – for example, from a 30-year to a 20-year loan – could be a smart move. While your monthly repayments will go up, you’ll pay off your home loan faster and save money on interest in the long run. This option works best if you have enough income to comfortably cover your everyday expenses with extra cash left over.
Tip: Use a budget to track your expenses and check that you can manage the additional cost of repayments.
3. To access home equity
If your property has increased in value, refinancing could give you access to the equity in your home to fund renovations, investments or other financial needs. Equity is the difference between what you owe on your mortgage and what your home is currently worth. Depending on your financial situation and the type of home loan you have, you may be able to access up to 80 per cent of your equity.
Tip: Leveraging the equity in your home is a smart financial strategy that can open up opportunities for building wealth.
4. To consolidate debt
Juggling multiple repayments to various high-interest debts – such as credit cards or personal loans – can be complicated. Refinancing to combine these into your mortgage helps lower your overall interest payments and simplifies your finances. What’s more, consolidating short-term debts – and making on time repayments – actually boosts your creditworthiness, which improves your access to further lending.
Tip: Debt consolidation can make budgeting easier because there’s only one loan to manage.
5. To get a more flexible loan structure
Just as your life changes over time, so too should your home loan structure. If your current mortgage doesn’t fit your financial goals, refinancing could help you switch to a loan with better features, such as offset accounts, revolving credit or the right mix of fixed and floating rates.
Tip: Splitting your home loan can give you a balance between the certainty of a fixed rate and the flexibility of a floating rate.
Make your home loan work for you
Refinancing your mortgage could help you save money, pay off your mortgage faster, or unlock extra funds for renovations or investments. Don’t let your mortgage sit on autopilot! Book a mortgage review with a Mortgage Express adviser today and find out how refinancing can make your home loan work better for you.
