What’s really involved in a refinance? We lift the lid on how a refinance works and reasons to consider doing it.

It can be a smart way to help better manage your money and ensure that your loan is still suited to your current needs. But what is refinancing and how does it work?

Here we take a look at what refinancing is and some common reasons to consider doing it.

Why do people refinance their loan? Check out these 4 common reasons below.

1. To save with a better rate

The most popular reason homeowners choose to refinance a home loan is to lower repayments and save money. With interest rates being the lowest on record, it's never been cheaper to pay off a mortgage and pocket some valuable savings. 

Could you get a better rate without refinancing? Potentially, yes. Your Mortgage Choice broker can contact your current lender and try to negotiate a better rate on your behalf. So, if your current lender won’t budge on your rate, they can let you know if you could get a better deal elsewhere, in which case refinancing may be a better option.

2. Access equity

Refinancing is also an opportunity to tap into any home equity you’ve built up. Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth or simply achieve personal goals.

Want to renovate or upgrade? You may be able to draw down on your equity to help fund it or even upgrade your home, purchase an investment property or guarantee your child’s first home.

3. Switching between fixed & variable

If you'd prefer the certainty of repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Refinancing your home loan lets you do this. Or, you may decide you'd like to take advantage of a lower variable rate as you can accept the risk that rates may rise in future.

4. To consolidate debt

Refinancing your home loan can provide an opportunity to streamline your debt, and potentially reduce the overall interest you're paying on multiple debts through the process of 'debt consolidation'. It means folding several high interest debts into one lower rate debt – which could be your home loan - and this may reduce your total monthly repayments. 

Your financial wellbeing is important to us. 

At Mortgage Choice we know that everyone’s situation is unique. By giving us a call today, we can fast track your home loan health check to let you know sooner if refinancing is the right option for you.