There are many reasons that people refinance their home loan. However, it always comes back to the same core principle, they want to get ahead. After all, wanting to achieve personally, professionally and financially is a natural human trait that has pushed us forward as a species for thousands of years.
Depending on your own unique set circumstances and goals, there are a number of refinancing strategies that you could consider utilising to catapult you towards your own version of success!
1. Secure a Better Deal and Save Money
Refinancing to secure a more competitive interest rate is a real no brainer. With so many lenders in the marketplace and the home loan environment becoming increasingly complex month after month; it only makes sense to team up with a skilled and trusted mortgage broker to ensure you are on the best deal for you. A little bit of effort here could potentially lead to thousands of dollars in savings.
2. Secure Better Features and Get Ahead
If you were working with a talented financier when you first took out your home loan, it is likely that it was correctly structured with the features that would provide you with the most benefit to suit your situation. However, that was probably years ago, and the features that are available today plus your own changes in circumstances probably means there are more suitable options out there for you. Some of the features you may be missing out on are: extra repayments, redraw, offset, splits loans, etc.
3. Correctly Structure Your Finances
The lending environment has changed so much in recent years and the level of complexity when structuring your home loan has never been higher. Having the correctly structured finance could improve your cash flow and ensure you are achieving your goals quicker than ever. There are a huge number of levers you need to pull to structure the best home loan today, including owner-occupied, investment, short term fixed, long term fixed, variable, interest only, principal and interest, etc.
4. Consolidate Your Expensive Debts
A residential home loan is probably the cheapest form of debt the average person will ever have, assuming a rate of 4%. Other debts such as personal loans and credit cards can range anywhere from 6% to 20% plus. With this in mind, a lot of the time it makes more sense to consolidate more expensive debts into the home loan, secure the lower interest rate and use the spare cash to smash the debt and pay it off sooner.
5. Release Equity to Invest
I love this. When you see people who continue to buy multiple investment properties and grow a substantial property portfolio, it is more than likely this is how they are doing it. Assuming you have the cash flow to service the debt and you have a sufficient amount of equity in your existing property or properties, you can borrow against this equity and use the cash as a deposit for your next property. Rinse and repeat a handful of times throughout your working life and you can see the magic happen right before your eyes.
6. Renovate or Rebuild
Assuming that you had the cash flow and the equity in your existing property or properties, you could utilise this equity to secure the funds required to renovate or rebuild. This could be anything from borrowing to install a pool in time for summer or borrowing to complete a full knockdown rebuild on the dream home.
What are your goals?
Could a refinance help you achieve them quicker?