When to consider home loan refinancing

For long-term borrowers, it’s easy to get into a pattern of repayment and assume that there’s no need to tweak things here and there. What might surprise you is that becoming complacent with your home loan could be costing you thousands.

It pays (literally) to do a regular assessment of your mortgage, whether it is simply to take stock of your progress or look into home loan refinancing. To avoid missing out on a better deal, consider when might be a good time to refinance with these tips.

Look for favourable interest rates

The board of the Reserve Bank of Australia (RBA) meets once a month to discuss a variety of financial issues, but the key point regarding home loans is the official cash rate (OCR) decision. Changes to the OCR have often have immediate impacts on home loan interest rates, which rise and fall in line with the RBA’s decision.

Between 2010 and 2015, the OCR has fallen dramatically, from 4.5 per cent to just 2.0 per cent. Those who have been paying off their mortgage over a long span of years might find that home loan refinancing can result in a significant reduction in their own interest rate, which translates to savings in both time and money.

Unlock your equity

Even though you’re already paying off a loan, there are times when you need to top things off to meet a new need. Maybe it’s a new car, a well-deserved vacation or some important renovations; whatever the situation, having access to some extra cash can be a real life saver.

That’s where home loan refinancing can help. Talk to your mortgage broker about using your equity (the difference between your home’s current value and what you owe) as collateral, and top off your loan with the extra amount to help you meet whatever financial situation you’re facing.

Make things easier with debt consolidation

In today’s credit-based economy, the majority of people are juggling more than one source of debt. The Australian Securities and Investments Commission tracks Australia’s combined credit card debt at over $30 million, an average of over $4,000 for each Australian citizen. Taking into account that many people have multiple credit cards, juggling debts from several outlets can be a huge headache.

If you’re finding it a challenge to keep track of where you’re making all your repayments, consider rolling all your debts into one with home loan refinancing.