When to Seek Refinancing

Refinancing is a great way for borrowers to get better deals on their mortgage as their needs and the market change. Through this kind of arrangement, borrowers are no longer tied down to a single type of loan for the entirety of the term. They can take advantage, for example, of paying lower interest rates than the original rate that came with their home loan.

However, timing is also key to making the best out of refinancing. What you need is a clear idea of why you want to refinance to truly enjoy its benefits. Here are some situations when refinancing might work for you:

  1. To enjoy lower interest rates. With the recent rate cuts by the RBA, it only makes sense to take advantage of the lower rates now available to everyone. Of course you can't do this if you're in a fixed rate loan. Refinancing would therefore help you switch from a fixed to a variable rate loan, so you can enjoy lower interest rates.
  2. To get more flexibility. Can you withdraw some of the extra money you already gave to the lender for repayments? Yes, you can if you have a loan with a redraw facility. So unless you already have this type of loan, refinancing can help you move to a more flexible arrangement.
  3. To renovate your home. During renovation, it makes sense to get refinancing and take out a construction or renovation loan. The reason for this is that a construction loan allows you to take out only portions of the loan depending on which phase of the project you are in. What it means is that you get to pay smaller interest since you're only paying for a portion of the loan you already took out. This can be easier on your finances than making repayments on the entire loan.
  4. To manage your repayments. It could be that your financial situation has changed since the last time you took out a home loan, and you're at the brink of defaulting. You can avoid the situation by getting refinancing for a smaller loan or one with a longer term.

All in all, refinancing provides you with greater flexibility unlike home loans of the past. But to take even more advantage of your home loan, it helps to get the advice of experts, like the qualified advisors at Rate Detective. They can provide custom-fit solutions to your mortgage needs by showing you rate comparisons of Australia's top lenders. Contact us today!

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Published on November 11-th, 2012 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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