Get the most out of refinancing
Everyone wants to pay less on their mortgage and refinancing is one strategy that can help lower your interest rates, but is it worth it? We take a look at how you can get the most out of refinancing.
Generally, people refinance to negotiate a better deal on their home loan and pay it off sooner. Depending on your situation, you should be able to save money by taking advantage of lower rates or new products that were not available when you first negotiated your home loan.
To put this into perspective, let's say you took out a $300,000 loan at 7.5% over 30 years with monthly repayments of $2,098. If you refinance to a new loan at 4% you could save $239,543 ($665 per month) over the life of the loan by making the minimum repayments of $1,432 per month.
Once you have refinanced, if you continue making the same minimum repayments as your previous loan ($2,098 per month) you will potentially save $346,912 and pay off your mortgage 165 months early.
Make it work for you
Take advantage of your refinance loan by:
When should you consider refinancing?
Life brings change and your mortgage needs to keep up - maybe now you have a partner, a young family, a new job that pays more or have become empty nesters with extra cash on your hands. If the terms of your current loan do not allow you to pay more (or less) on your principal amount, it could be worth considering refinancing into a more flexible arrangement.
Refinancing or loan switching can save money but you might incur costs such as exit and establishment fees, government charges and administrative or legal expenses. These costs need to be weighed against the benefits to determine if you will save in the long run.
Before you make any decisions, be clear on your reasons for refinancing. It is also a good idea to speak to an experienced mortgage broker or financial expert to ensure you are making the right move for your financial situation.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence No. 391237).
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