How refinancing your home loan can help you save money
During the uncertainty and stress that can come with COVID-19 lockdown, many Australians are increasingly looking for additional ways to save money.
Switching or refinancing your home loan can potentially save you thousands of dollars in cheaper interest rates and lowered fees. But many borrowers might not be aware that you can also refinance your home loan in order to borrow more money, switch to a more suitable loan product or to access extra features like an offset account.
“Refinancing a home loan” is the term for when a borrower changes their existing mortgage to a new one. This could mean:
- Staying with your current lender but changing to a cheaper home loan product, or
- Going to a different lender, who help you determine the most suitable home loan product for your circumstances, and take over the existing mortgage
If you’d like to know how to refinance a home loan, the good news is that it’s actually much simpler than most people think! In the past, refinancing your home loan might have been a very lengthy and complex process. But these days with a competitive Australian home loan market it’s now easier for borrowers to transfer their existing home loan to a new loan provider. This puts you in a great position as a borrower if you’re looking to refinance. If you don’t think you’re getting a good deal with your current home loan provider, chances are you could potentially save thousands by refinancing.
What are the main benefits of refinancing?
- You can repay your mortgage faster
When you’re making interest payments on your home loan, time is money. To help save time (and reduce the length of your mortgage term) on your home loan, you could choose to refinance to a lower rate, but keep your regular repayments the same. This can take a bit of discipline, but it can result in some serious savings down the line. If you’ve budgeted well and you’re comfortable with your home loan repayment at its current amounts, refinancing to save time on your home loan can be a sound financial decision. The more time you’re able to take off the length of your mortgage, the more clearly the savings and benefits will add up.
- You can save significantly more money over time
This is one of the most common reasons why people choose to refinance their home loans. A cheaper home loan generally means a home loan with a lower interest rate, fewer fees and costs, and ease of repayments (or in many cases, all of the above). It’s hard to overstate both the short-term and the long-term benefits of taking a few basis points off your home loan rate; it can save you literally tens of thousands of dollars over the term of your loan period.
- You can get access to better loan features and benefits
Price isn’t always the only factor that differentiates Australian home loan products. While many of us might only pay attention to the interest rate when we’re comparing our home loan options, it can often be just as important to look at the added features or benefits available. The right home loan product can include features that provide:
- increased flexibility
- the ability to help you pay your home loan off faster
- streamlined online or mobile banking products
- access to an offset account
- the ability to make extra repayments
- lower admin fees
If your current home loan doesn’t provide enough features that help you take charge of your finances, it might be time to think about refinancing to a loan that feels more suitable for your needs.
- You can potentially unlock equity
“Equity” is the difference between the amount you owe on your home, and its overall value. Over time, the value of your home is likely to increase. While the Australian property market can go through cyclical peaks and troughs, the predominant trend is for residential property values to increase over time. Unlocking equity could mean the ability to save or spend for the things you want – whether that’s a home renovation, a new car, a vacation or investing in other asset classes.
Are you comparing your current loan rates, looking to move house or just looking at different home loan options? Refinancing or switching your home loan can be one of the best financial decisions you can make – and with a range of products available, Homestar Finance are driven to help our customers find the product terms, rates and features that will help you best in the long run. Feel free to reach out to our customer service team for more information.
Note: When refinancing, you’ll need to be aware of possible fees you could be charged by your current lender. These could be discharge fees, early exit fees or break cost fees. Your new home loan will also attract its own fees for set-up and establishment, but if you would like more information our rates + fees are available on all product pages on the Homestar Finance website.
This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.