- How much could refinancing save you?
- Could you refinance to unlock the equity in your property?
- Would you benefit from a longer or shorter loan term?
- Is refinancing worth your time and effort?
- Would you benefit from a different loan product?
Are you thinking about refinancing your home loan?
Maybe your current loan product no longer suits your needs. Perhaps you’ve seen some attractive home loan rates advertised and would like to take advantage. It could be that you want to use some of the equity you’ve built up in your home for a renovation or home update.
Whatever your reason, here are five questions to consider before refinancing your home loan:
1. How much could refinancing save you?
Refinancing means moving an existing home loan from one lender to another (or asking your current lender to give you a more competitive rate or more suitable loan product), and it can make real financial sense. In today’s historically low interest rate environment, one of the major ways you could save through refinancing is by securing a lower interest rate. For example, on a typical home loan of $400,000 even a small reduction in interest rates can save you hundreds of dollars a month in repayments and tens of thousands over the course of your loan.
2. Could you refinance to unlock the equity in your property?
If you’ve owned your property for more than a couple of years, it may have increased in value. Refinancing can provide an opportunity to have your property re-valued. If it’s gone up, you may wish to use the refinancing process to borrow additional funds for a renovation or to purchase a property investment. Unlocking the equity in your property through refinancing is a popular strategy that can help you achieve personal or financial goals.
Of course, it will pay to keep an eye on property prices over the coming months, as they may trend downwards as a result of the economic effects of Covid 19 potentially impacting some of your equity.
3. Would you benefit from a longer or shorter loan term?
The term of your loan affects the cost of your loan repayments. Generally speaking, the shorter the loan term, the higher the repayments you will be required to make. Refinancing your home loan could allow you to vary the term of your loan. If you want to reduce your repayments, you may be able to refinance for a longer loan term. If you are looking to pay off your loan faster, you might consider a shorter loan term when you refinance.
4. Is refinancing worth your time and effort?
Refinancing a home loan involves a similar process to applying for a new loan, and there is some time and effort involved. You need to provide documents such as pay slips and bank statements, and there could be some liaising back and forth with your new lender. This time investment quickly pays off however, if your new loan saves you money or is better suited to your needs.
5. Would you benefit from a different loan product?
As we move through life, our circumstances change. The loan you took out a few years back may not suit your needs today. For example, many home loan products come with annual and monthly fees. Some lenders, including BankVic, in most instances, offer home loans with no ongoing service fees and other benefits such as free redraw.
You may also be looking for better service from your bank, including Melbourne-based customer support. If you are paying fees on your current home loan, refinancing could be an opportunity to save by securing a low-fee loan, coupled with genuine customer service.
If you’re ready to refinance your home loan, get in touch with BankVic today. Our mobile lenders are available for phone or video chats and can assist you with your application outside office hours if this is easier for you.