With everything getting more expensive, it’s no surprise that many of us are looking for ways to keep a little more cash in our pockets, with recent research from Commonwealth Bank showing a 1.0% drop in household spending from March to April.
What’s more, over the past year, spending has risen by just 2.6%, a figure comfortably below the current annual inflation rate of 3.6%, according to the Australian Bureau of Statistics.
This tightening of household belts was particularly notable in discretionary spending, which fell by 4.4% from March to April, underscoring the broader effort to economise amid rising costs.
In this financial climate, refinancing your home loan could be a smart strategy to help lessen your financial load.
Why should you consider refinancing?
Refinancing involves replacing your existing mortgage with a new one, potentially offering better terms and rates. It’s a strategic move that can provide several benefits, depending on your financial goals and circumstances.
Save money with a lower interest rate
Lenders regularly adjust their offers to stay competitive in Australia’s crowded home loan marketplace. As such, refinancing your home loan can help you secure a reduction in your home loan’s rate. This means you’ll pay less interest, which can add up to tens of thousands of dollars in savings over the lifespan of your loan. Additionally, securing a lower interest rate can also decrease the size of your monthly repayments.
Reduce your monthly repayments by extending your loan term
If you’re feeling the pinch, extending the term of your loan through refinancing can lower your monthly payments. This can free up some cash each month, giving you breathing room for other expenses
Consolidate your debt
Many Australians juggle multiple debts, from credit cards to personal loans. Refinancing can allow you to consolidate these into your mortgage – often at a lower overall interest rate – reducing your monthly outgoings and making managing your money simpler.
Keep in mind, though, that spreading out the repayment of your debts over the longer term of a home loan could lead to higher overall interest costs.
Tap into your home equity
Your home equity is the portion of your property that you truly ‘own’. If your home has increased in value, refinancing can help you tap into this equity to fund renovations, invest in property or cover significant expenses, effectively putting your asset to work.
When might refinancing not be the best move?
Refinancing isn’t a one-size-fits-all solution. The costs associated with refinancing, like application fees and possibly fixed-loan break fees, can add up. You’ll need to crunch the numbers to ensure that the potential long-term savings outweigh these initial costs.
Additionally, if you plan to move soon, the upfront costs of refinancing may not be recovered in the time you remain in your home.
Finally, if your credit score has decreased since you secured your original mortgage, refinancing might not result in better loan terms.
How a mortgage broker can help
Figuring out if refinancing is right for you can be tricky. This is where an expert mortgage broker like Shore Financial comes in handy. We know the market inside-out and will tailor advice specifically to your situation, helping you weigh up the pros and cons of refinancing.
We then compare different loan products and lenders to find the best fit for your financial goals and situation, managing all the paperwork and negotiations to make the process smoother and less stressful.
Looking to save money on your home loan? Shore Financial can help. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form.
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