1. Cheaper Rate

Number one is cheaper rate.

Most people do not understand how much they can save by refinancing their home loan, and this is because the idea of finance is considered very complex.

What people need to understand is that they need to go through this process in order to maximize their savings, where most people can actually save a minimum of $2,000 per year just by switching their mortgage to a cheaper lender.

Lenders are even offering what’s called “refinance rebate”, where per home loan you can get up to $4,000 to encourage you to switch over.

So, refinancing to a cheaper home loan interest rate is not as hard as what it seems. If you have a good mortgage broker on your side to do the heavy lifting like the team here at Will Bell Mortgage Broker, they can access these results for you straight away.

With all of those additional savings and a lower mortgage rate, you’ll be light years ahead of where you would have been otherwise.

2. Debt Consolidation

The second reason why you should refinance your home loan is to consolidate your debt.

If you have other debt such as a car loan, personal loans or credit card, it can be beneficial to consolidate them into your home loan.

Credit cards, by the way, are one of the most dangerous credit instruments going around. The is because there are many credit cards still charging you a 20% interest rate., and sometimes the temptation to overspend is so great that many people can get caught into a debt trap.

Refinancing and consolidating your loans can get you out of that trouble and get you back on track with your finances.

3. Renovation

Reason number three is renovation.

Homes obviously age and deteriorate over the period of time, so we’d love to renovate a part of the house like the kitchen or bathroom, or sometimes we just want to put a deck out the back. There are really many different things you would want to do with your property over the years.

A lot of people don’t know that you can actually refinance your home loan and access some cash to pay for the renovations provided you’ve got equity. Most people have equity if they owned their home for more than two or three years. The more equity you have, the more cash you can access assuming you’ve got the income to meet the loan repayments.

The good thing here is that you can do this without increasing your actual loan repayments.

If you want to do a renovation soon and refinancing now looks as the best option for a cash-out, our team is available to help you out!

4. Divorce or Relationship Split

The number four reason is surprisingly one of the most common reasons why people refinance their home loans. I would say probably 15% to 20% of all of the refinancing I do is because of relationship splits or divorce.

I will be asked by clients to help with financing when they need to divide the assets and then make an agreement where one party gets to keep the property and has to pay potentially the other party out. That means they need to refinance the loan and put the property in their name.

This is an issue that is very tricky that many are unaware of since it involves determining the client’s maximum borrowing capacity based on the income lenders will accept.

Different lenders will have different rules on things like child support, Family A & B, single parent payment, and many other things.

This means that just because one lender tells you that you can’t borrow enough it doesn’t mean there’s other lenders out there that will be happy to offer a larger loan amount.

There are also other external factors.  For example, if you’re going to court, it can take quite a while for the court to sort everything out and create the court order that basically say whoever’s going to keep the house to be able to refinance.

Most of the time this will involve a long and tedious process, so if you want to avoid a lot of the stress and save a lot of time and effort, especially if it involves kids, engage a good mortgage broker right from the start.

5. Fixed-loan term is ending

Another good reason to refinance your home loan is when your fixed-loan term is ending.

This is a common one. What happens when you’re on a fixed loan term is it’ll just stick with the existing lender, but it will roll into principal and interest repayments on a standard variable rate.

The thing is, most lenders won’t discount that standard variable rate or will just give a very small discount – that means you’ll be on a massive interest rate.

My first word of advice here is to negotiate with your existing lender, because if they can provide you the rate that you’re happy with, then there is no need to refinance your home loan.

So common caution, always remember to check your standard variable rate once it rolls off that fixed-rate period. That may be the time when you would need to refinance your home loan.

6. Buying another property

Here’s the last most common reason that I have for people wanting to refinance their home loan – it allows them to buy another property.

Some clients want to buy an investment property to improve their wealth, or they just want to buy a bigger family home because they’ve got a growing family.

How does that work? First, it works through equity.

Equity is the difference between what your property is worth and what the loan is.

The whole idea is the banks will be happy to lend you part of your equity, which sometimes is a large amount, and then you can use it towards upfront costs like stamp duty and the deposit to purchase a new property.

The only challenge with this is that you need to qualify for the finance because you’re taking on another debt.

So your income has to be quite good, and you can’t just say you’ve got a lot of equity and then borrow as much as you can. It doesn’t work that way.

You still have to prove your income. Usually, if you’ve got two properties, one property is going to be an investment. Therefore the income from that property can be considered when it comes to calculating how much you can borrow, and this will improve your borrowing power.

But if you’re refinancing to buy a bigger family home, what you need to do is get yourself a good mortgage broker. They’ll be able to figure out most of the time within a 15-minute chat whether there is something that’s on the cards specific for your needs.