Getting real about refinancing
Just because you find the right loan now doesn’t
mean it’s going to still work for you in 5 year’s
time. That’s where refinancing your mortgage comes in.
Not everybody sticks with the same mortgage throughout its whole term. While it’s tempting to think
that when you find the right loan you’ll stay with it until it’s fully paid off, there’s a good chance
you’ll end up refinancing that mortgage at some point.
Why do people refinance?
Borrowers refinance their mortgages for a variety of reasons, generally to do with making their loan more suitably match their current circumstances. People’s situations change over time, and the loan that suited them 5 years before may not be the perfect fit now.
Some of the reasons borrowers might refinance include if:
Interest rates fall and they want to jump on the bandwagon
They want to change the type of interest rate – from, fixed to variable, for example
They need cash for a large expense, like renovations or a vehicle
How does refinancing work?
Upon taking out a new home loan, a portion or all of these funds will go toward paying out your current mortgage.
Refinancing doesn’t have to be done through a different lender though – many people end up taking out a new loan
through their existing lender, if the product is the right fit.
Is refinancing always a good idea?
Any home loan decision should only be taken if it serves your best interests. There’s no point refinancing just for the sake
of it – it doesn’t make for a terribly good story at parties! But it never hurts to ask your mortgage broker for a home loan
health check to see whether it’s the right option for you.