Refinancing for the Future

12 Feb 2021

There is no doubt about it the term ‘refinancing’ is buzzing around at the moment. With the Reserve Bank dropping the interest rate to an all-time low money is ‘cheap’, but what does that really mean for you as an existing mortgage holder and what questions should you be asking yourself to see if it is the right option for you?
Firstly, why are you looking at refinancing? The most popular reasons are:

  1. To access the equity for something major (like a renovation) or investing in another property.
  2. Looking at changing to a more competitive rate and lowering interest repayments.

1. Are you looking to refinance to withdraw equity? 

In a nutshell the equity in a home is the value of the property minus how much you owe on your current mortgage, for instance, you bought your home over 10 years ago for $500,000 with a 20% deposit of savings equating to $100,000, making the value on your mortgage $400,000. Over the 10 years you have paid off $150,000 of the loan’s principal, leaving $250,000 owing. Your home’s value has increased to $550,000 which means the equity in your home is now $300,000.
You may be able to withdraw the equity to invest in an investment property or holiday home.


2. A more competitive rate
A more competitive rate.Other reasons you may be looking at refinancing are, to save on your interest repayments, this can save you $1000’s. For example, on the average home loan of $500,000, if your original interest rate was 3.43% p.a. your weekly repayments would be $572.92, changing to a lower rate of for example ING’s current 4 year fixed rate of 1.99%p.a. would save you $84.66 per week which equates to $4,402.32 per year.
So, what are the roadblocks with switching you home loan? Some lenders have exit fees associated with switching to a competitor, however in the same regard, many offer a cash back rewards which will cover the fees and give you a little extra cash as a reward.
Like any finance option, you are best to engage with a qualified and impartial professional.
In this case, a Mortgage Broker can work with you to discover the best solution for your individual circumstances. At Peard Finance, we have a group of qualified and professional mortgage brokers on hand to help guide you on which option is right for you now and your future financial aspirations. They have access to over 30 lenders and hundreds of financial products to see which suit you.
Speak to one of our mortgage brokers today for an obligation free conversation on what we can do to help you.
Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.

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