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Reasons to refinance

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It makes good sense to review your home loan from time to time to check that it is still continuing to meet your needs with the features you need or want while offering you an interest rate that is competitive with the current market.

Today’s mortgage market is very competitive. New loan types with features and packages are becoming available and loan interest rates vary widely too. As your circumstances and stage of life changes, you may find that your loan no longer offers the features and flexibility that you need. You may also find you have built up some equity in your home that you would like to access to fund home renovations or investments like other property.

Save money with a lower rate

Whilst refinancing has the potential to put money back in your pocket, the loan interest rate should never be the only factor you consider when choosing a home loan. There are a wide range of lenders and loans to choose from, chances are you may be able to secure a more competitively priced loan with a different lender. It could be as simple as discovering you are paying for features you don’t need or use on your current loan. If you think you’re paying too much, contact an expert mortgage broker at Etairos, who can compare hundreds of loans to see if you could save money by refinancing.

Access loan features

If your circumstances have changed, or if you’ve had your home loan for a few years, refinancing can offer you the chance to take advantage of more flexible features. An expert Aussie Mortgage Broker can advise on the features best suited to your needs, but some money saving features to look for are: Flexible repayments – the option to pay a little extra off your loan when you have some spare cash helps you cut time and money from your loan

Redraw: lets you withdraw any extra repayments if you need the cash. Look for a loan offering free redraws that can be arranged over the phone or online

Flexible rate options: switching your loan between a variable rate and fixed rate, or splitting your loan between the two helps you manage your mortgage in line with interest rate movements

Portability: the ability to take your loan with you when you move can make life a lot easier, and save on fees, further down the track

Improve cash flow

Debt consolidation is the process of folding high interest debts like a credit card and personal loans into one low rate loan like your mortgage. If available, it means you will have just one repayment to manage each month and it may also offer big savings. The interest rate on a home loan is far lower than the rate on other types of credit. This lets you save on interest charges and helps you pay off the debt sooner. However debt consolidation has the potential to turn a short term debt into a long term one. You should aim to pay off the new, larger home loan as fast as possible. Making extra repayments from the savings provided by the consolidation is a great way to get ahead with your home loan and make the most of debt consolidation. Alternately you could structure the debt using a split loan to represent the amount of consumer debt you have consolidated. A licenced credit advisor at Etairos can give you a clear idea of how much you could save by consolidating your debts – along with some useful tips on how to pay off the overall balance sooner.

An opportunity to invest using home equity

Home equity’ is the difference between your home’s value and the balance of your mortgage. If your home is worth $500,000 and you have $200,000 remaining on your home loan, your home equity is $300,000. Ideally you would limit the equity you draw on to 80% of your home's value meaning you have access to $100,000 that could be used to build your wealth. Refinancing your home loan can be a great way to access home equity to invest in other areas such as investment property, shares, or managed funds. In most circumstances the net cost of using borrowed money to invest is claimable against personal income and is known as ‘gearing’. It’s a strategy that can provide tax benefits but it also carries risks. It's important to speak with a qualified financial advisor or accountant to determine if a strategy like this is the best option for you.

A chance to achieve personal goals

Your home equity doesn’t have to be used for investing. It can also be used for a wide range of purposes like paying for your children's education or funding home improvements like a pool. It is up to you but we don't recommend using home equity for lifestyle purchases like holidays.

All these circumstances make it worth thinking about refinancing. If you’re unsure, it can help to speak with someone you trust, like friends, family members or an expert credit advisor like Etairos Finance

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