As a customer-owned bank, we know that your home loan should be something you don’t have to worry about. So here are a few things to consider before you go ahead and make the decision to refinance.
What is ‘refinancing’ my home loan?
Refinancing a home loan basically means paying out your existing mortgage with a new loan. One obviously important thing here is that your new loan should offer you advantages over your existing loan, otherwise, why do it?
When do people choose to refinance?
People’s needs change over time. Each stage of life brings its own financial requirements and desires. As people find themselves in a different financial situation, it’s a good time to assess their home loan to see if there’s a better option available.
More simply, sometimes interest rates are at a lower level and people are tempted to change their loans.
Why might I want to refinance?
There are several reasons that people generally have for refinancing their loan:
- To get a better interest rate. This could either reduce the amount you pay each month or let you own your home sooner.
- To get better features in a loan. You may want to take advantage of features that some home loans offer, like redraw, flexibility or loan-splitting. It may help you manage your finances better.
- Using the equity to renovate.
- Reaching the end of a fixed-rate term. You may be free to leave your loan and take advantage of a better interest rate.
- Consolidate your debts. This can be a great help in managing your finances such as credit card debts, car loans and personal loans. But, it’s important that you don’t run up new debts on your newly paid-off credit card as that can spell trouble. To invest. There could be tax advantages if you refinance and use the equity in your home to invest in shares or property or a business. Such tax advantages should certainly be considered when thinking about refinancing.
What should I be aware of?
There are several things to watch out for when refinancing which could affect your decision. Bank First will help you to avoid such pitfalls.
- Moving to a longer-term loan. If you do this, you may end up paying a lot more interest in the long run.
- Consolidating credit card debt. Be aware that your debt will now be borrowed against your house rather than just an unsecured credit card loan, this could have serious consequences if you default.
- Variable to fixed rate. Make sure you intend to live in your home for a longer term than you are locked-in for, otherwise you will end up incurring charges when you move.
- Investing. If you refinance and use the equity to invest, check whether the percentage returns on your investment will be better than the interest saved by paying off your mortgage earlier.
How do I work out if it’s worth refinancing?
Start by looking at your current loan. What do you like about it, what do you dislike?
Is your current lender giving you the access and service that you require?
Not all lenders are equal when it comes to customer service. As a customer-owned bank, we treat our bosses with respect.
Is your current loan variable or fixed? And what rate are you currently paying?
What costs are involved?
Research all the fees you could be up for. The exit fees from the old loan and the establishment and any ongoing fees of the new loan.
Then it’s a matter of working out how much it can save you each month when you take into account all of the costs involved in setting up the refinance. Sometimes it can take a few years before you actually get those outgoings back with interest saved.
The Bank First Refinance Calculator can help.
A good place to start is by comparing your current rate with the Bank First Refinance Calculator. By simply entering a couple of figures, we can show you how we can help. We’ll even let you know if you’re already on a good rate.
Or, feel free to talk to us on 1300 654 822. We’re always happy to help our customers work out what’s best for them. Because, what’s best for our customers is best for us.