We pride ourselves on getting the best possible deal for our clients, every time!
However, the mortgage market is constantly changing and evolving, with lenders locked in a never-ending battle to win new business and boost their market share.
Rate cuts, fee reductions, cash incentives, improved lending criteria, limited time offers – the banks will do whatever it takes to get one up on their competitors.
This means, it is virtually impossible to have the best loan and be on the best rate all the time!
This is why we recommended you review your finances at least every two to three years.
Before refinancing always consider your circumstances over the next few years. You should ask yourself whether flexibility, a lower rate, lower fees or debt consolidation is the goal.
There can be many reasons to refinance – a job change influencing your financial situation, your current mortgage rate is too high, you want to raise funds to buy an investment property or to renovate your existing house.
Even if you don’t have any specific reason in mind, it’s always worth weighing up the viability of refinancing from time to time.
Around every two to three years is a good time to fully reassess your home and investment loans and compare them to other products in the market.
By doing this, you can determine if a change will provide you with the flexibility you require now, or if your current fees and charges are high compared to other products.
This time-frame also allows you to manage your interest rate risk and avoid costly break fees.
Fixed Rate Loan Expiry
If you have locked in all or some of your loans over a three-year period, it would be a good idea to start looking at least a few months prior to its expiry.
Finishing off the three-year period will also ensure you minimise the ‘get out fee’ charged by most banks.
Lower Interest Rate
Wanting a cheaper interest rate and lower repayments is one of the most common reasons to refinance.
Even a slight increase in your interest rate can make a major difference over a long-term loan.
Others who are looking to refinance might just want to fix their repayment, especially if they sense rates might bottom out.
Another reason to refinance is to consolidate your higher interest debt, such as credit cards and personal loans, into your lower rate home loan. Considering some credit cards have rates as high as 20% the savings can be considerable!
However, the key is to make sure you pay a little extra on your home loan each month so you actually pay off the consolidated debt over at least the same expected time frame. The same is true if you refinance to a lower interest rate – rather than spend the extra cash/savings you have each month, pay some extra on your home loan and watch the balance reduce even faster!
We wrote a post on debt management here which goes into the benefit of debt consolidation in much more detail.
Some borrowers also want to refinance to use the equity in their home to pay for home improvements or for other reasons.
Just keep in mind, while allowing you to expand your property portfolio or house value, taking on more debt will increase your interest costs and loan term. So just make sure you do your numbers and use your equity wisely, such as cash flow generating and appreciating assets.
Want us to review your finances – call 8451 1500 or click here
Sam, Matt & Andy
Adelaide Finance Brokers + a lot more…
PS. You can see a selection of our best interest rates here. You’ll find a handy loan comparison calculator on the page so you can work out how much you could save by moving to a cheaper home loan.