There are many reasons why you may want to refinance your existing home loan to a new lender however before you do it’s crucial to ensure it comes with the all benefits you are after. At Prosper Finance its our job is to make sure you get the lender and product that is right for you and your current needs.
Why should you refinance your home loan? Before making such an important financial decision, it’s essential to understand why you want to refinance your mortgage.
WANTING A MORE COMPETITIVE RATE
Is your current interest rate competitive? If not switching to a lower rate is going to save you money and will also shorten the life of your home loan if you can keep your monthly repayments unchanged. You’d consequentially build equity in your home faster. However, if you wish to refinance due to changes in your life, such as a career change with a pay cut, a newborn baby or simply unexpected expenses you can take the advantage of smaller repayments on the flip side.
UPGRADE YOUR HOME LOAN FEATURES
New products become available every day. Get a loan with better features like an offset account, flexible payment options and a redraw facility.
There are situations in life we don’t have control over in which you might find yourself in need (or want) of some extra cash: home remodelling, college education, a new bike when we refinance we can access equity in your property and often get you a little cash out for whatever you need.
If you are refinancing to access equity you will need an up to date valuation of your property, as the value will more often that not have changed since your purchase.
Refinancing to access equity needs serious consideration and you may require guidance from a financial planner as it can make your mortgage last significantly longer.
Debts consolidation is another good reason to consider refinancing.
If you have multiple debts to repay each month and you feel like the situation is getting out of hand, then rolling all your debts into your home loan can be a solution.
If you have, for example, more than one credit card, a car loan, or a student loan on top of your home loan and every month there is a repayment due. That can be stressful and expensive!
Consolidating your debts can save you money, stress and time. The benefits that come with a debt consolidation are:
- Manageable repayments
- Easy budgeting
- Lower interest rates on the smaller debts
- Savings on multiple fees
- Work towards a “good debt” situation rather than nasty little credit cards debts
The case study below will give you an idea of what significant changes a refinance process can bring when the purpose is to consolidate debts.
John is currently paying off the following debts: home loan, car loan and four credit cards. He starts to struggle not only because he can’t afford them, also because managing so many repayments is making his life difficult. He then decided to consolidate his debts.
|Credit card 1||12,000||180|
|Credit card 2||8,500||210|
|Credit card 3||3,400||130|
|DJ store card||4,600||200|
John decided to contact a mortgage broker to do so. He was soon presented with a new low interest rate loan at 4.24% p.a. to pay off the total amount of his debts, $394,000. The new loan would make John’s monthly payments equal to 2,298 instead of the previous 3,360. This would lower John’s repayments by $1062 each month, however, John’s loan term would be now extended to 22 years instead of the original 20. Since John can’t wait to free himself from debts, he decided to keep the loan term unchanged and accepted to pay monthly payments of $2,438. This way, he still lowers the monthly payment by $922, he only needs to worry about a unique monthly payment instead of four and he is saving a notable amount of interests.
We at Prosper Finance take the time to educate our clients on how to stay credit card free after the refinance and debt consolidation has been executed. We will investigate all the costs involved before refinancing or consolidating your debts, and don’t worry our services are free of charge and we do all the work for you!
If you still aren’t sure whether refinancing or consolidating, give the friendly Prosper Finance staff a call on (02) 8971 4756 or email us at firstname.lastname@example.org to take advantage of your free home loan health check!