As time tiptoes by, your loan may no longer suit the new you, or perhaps you simply want to consolidate your debt to reduce financial pressure. Yes, refinancing can be a sensible strategy, where many loans have flexible features designed to save you money that might not have been available when you first signed up.
What is refinancing?
Refinancing simply means taking out a new home loan to replace your existing mortgage. It’s a strategy that can give you access to a wider range of loan features. Or you may simply need additional loan funds to complete a major project like home improvements. However for many home owners, the key appeal of refinancing lies in the ability to secure a more competitive interest rate.
How much could I save?
Refinancing your loan can deliver valuable savings, however there is also a range of costs to consider, and it’s important to check that the savings of refinancing outweigh the expense. Along with upfront charges applicable to the new loan, you may face ‘exit’ fees on your current loan. Refinancing a fixed rate loan could incur ‘break’ costs. In both cases the costs can be substantial.
Debt consolidation simply means folding a number of (higher interest) debts into a single loan – typically your mortgage – as the interest rate on home loans tends to be far lower than for other types of credit. Consolidation can be a worthwhile option if you have a number of outstanding debts including personal loans and/or credit cards, which could be charging interest rates approaching 20 per cent.
The process of debt consolidation is quite simple. Your home equity offers a source of funds to pay out your other debts, leaving you with just one low-interest loan. It can streamline money matters, provide savings on interest charges and offer valuable peace of mind.