Ever Thought About Refinancing? Four Signs You Should Consider It.

Over the life of a loan, your circumstances can change dramatically. So does the world around you. As life goes on, your mortgage may become incompatible with your current situation; interest rates could drop a few points, or you may begin to dream of bigger and better things. That’s why it’s important to revise your mortgage every two to three years.

While there are certain costs involved, refinancing your mortgage can help you save on interest, shave years off your mortgage term and allow you to cash out your equity.

What are the signs and when should I consider refinancing?

There are various reasons why people consider refinancing their mortgage – after all, no circumstance is the same. However, there are some common signs to watch out for.

1.    Your interest rate is at least 1% higher than current rates – or isn’t fixed.

There is a general rule of thumb discussed by Investopedia that if you can reduce your rate by 0.75 – 1% to match current rates on the market, then refinancing should be considered. This could save you hundreds in interest, which is something to keep in mind for the long term. Similarly, if you’re on a variable rate and want more stability, then refinancing to a fixed rate may be in the cards for you.

2.    You want to access your equity, have a lot of debt or want to increase your cash flow

If the value of your property has exceeded the worth of your loan, then you may be able to refinance to gain access to the equity in your home. In the case of needing to repay debt, this is where cash-out refinancing comes into play. This type of refinancing refers to taking out a new mortgage for more than what you owe. The difference is given to you in cash and can be used to settle your credit card bills or to fund a refurbishment of your home.

3.    You want to switch lenders

Among the other reasons you may look into refinancing, a big one involves assessing your current lender. You might find they aren’t working for you anymore, or you’d like to switch and take advantage of a package that suits your position better. Your broker will be able to determine other lenders to set your sights on – but it’s best to discuss before making a decision.

4.    Major family/lifestyle changes

Significant changes to your lifestyle or family could include expecting a child, getting married or getting divorced. These events can impact your budget or existing mortgage in various ways, so it’s a good idea to consider restructuring your finances accordingly.

At Select, we offer no-obligation, quality and free advice to help you reach your financial goals. If you are interested in reviewing your finances, give us a call on (08) 9417 3399 to speak with one of our brokers about your options.