👉The answer is simple, whenever it makes financial sense to do so.
Are you interested in hearing about mortgage refinancing? In the past, most people took out a mortgage and kept that original mortgage and continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Below I’ve outlined some of the reasons why people in Australia are refinancing their home loan.
1. A lower rate
The most common reason for people to refinance their mortgage is to get a better deal. But you need to be careful and consider the total offer and not just the rate itself. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. There are often charges for exiting your current home loan, plus charges for taking out the new mortgage you will also need to account for. When refinancing your home loan be sure that you are better off in the long run after taking into account all costs involved.
2. More flexibility
Many people only discover the full details about their mortgage once they’ve committed to it. When they try to do something and get told by their lender that it’s not available on their home loan or that if they do it a charge will be incurred. An example is a redraw facility which is the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, and is a key reason why many people refinance their mortgage to give themselves this sort of increased flexibility and pay off their home sooner.
3. To Renovate
Working from home and the change in current circumstances due to COVID-19 may have you thinking about renovating or extending your current home. If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as the building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.
4. To release Home Equity
As the property market has increased over recent years our homes have appreciated at a significant rate. e.g. a home you bought for $350,000 five years ago, might now be worth $550,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.
5. Danger of Defaulting
Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that, changes in life occur, but don’t stick your head in the sand. Reach out and speak with your Greater Geelong Mortgage Broker. If you’re having trouble making your mortgage repayments, we can talk about options to refinance your home loan to make it more manageable. The earlier you have that conversation the more options you will have available to you.
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