With the recent consecutive increases in the cash rate, millions of Australian homeowners are experiencing an increase in their mortgage repayments. With the rising cost of living, you probably are asking one question, is now a good time to refinance?
While it depends largely on your financial situation and goals, there are many reasons why you should find out if refinancing is right for you. At the very least, now is a good time for your mortgage broker to review your home loan to make sure your loan is still working for you.
Here are a few things to consider.
Interest rates are likely to rise further
Reserve Bank governor Philip Lowe has made it pretty clear that more rate rises are inevitable.
In fact, he’s indicated it’s not unreasonable for the cash rate to climb to 2.5 per cent.
Those on a variable home loan are likely to feel the pain of each cash rate hike, as lenders pass on the increases and repayments go up.
When is refinancing worth it?
You’ve been with the same lender for a long time
For some, the thought of refinancing can seem all too hard, but if you’ve had the same home loan for several years, chances are you could be getting a better offer elsewhere.
You’ve never heard of a redraw facility or offset account
Nowadays, there are all sorts of loan features and tools to help you save interest and get ahead. Two popular choices are a redraw facility and an offset account.
With a redraw facility, you can make extra repayments on your mortgage and save on interest, but still, access funds should you need them.
An offset account allows you to deposit money into a transaction account that’s linked to your mortgage. Deposited funds are offset against your loan balance, reducing your interest.
Your situation has changed
If you’re earning more money, your financial situation has changed or have different goals to when you took out your home loan, these are all good reasons to consider refinancing.
Your debt is out of control
A popular reason to refinance is to consolidate debt. This involves refinancing your mortgage and using your equity to pay off your debt.
There are pros and cons to debt consolidation, so it’s important to speak to us about whether it’s right for you.
You want to access your equity
You may want to use your equity for a big-ticket purchase, such as buying an investment property or renovating your home.
Refinancing can help you achieve these kinds of goals.
Like to know more?
With so many changes to interest rates at the moment, now could be the time to consider your financial position and whether it’s worthwhile refinancing.
We can help you work through how any additional interest rate rises would affect you and make sure you have the right home loan for your needs.
Maria Papa is a senior property and finance expert specialising in home loans, investment loans, self-employed loans, alt doc loans, car loans, personal loans, and loan protection. She has offices in Sydney, Melbourne, and Manila. If you have questions, you can call Maria at 0430 144 008 or email her at mpapa@maverickfinance.com.au.
Your full financial situation will need to be reviewed prior to acceptance of any offer or product.