If your New Years resolution for 2020 involved your finances, then you’re not alone. According to a survey by Finder, almost 25% of Australian’s plan to get out of debt this year.
If you’re a homeowner, then the new year can be a fantastic time to review your current mortgage, and with three rate cuts in 2019, it’s an ideal time to look at refinancing. While it’s always important to consider your own specific circumstances, here are 5 reasons to consider refinancing your home loan in 2020:
- Your Fixed-Rate Period is Due to Expire: If your mortgage came with a fixed-rate term that expires soon, then you should definitely consider your refinance options. Most fixed terms are only between 1 and 5 years in length, after which your interest rate will revert to your lenders’ standard variable rate. Since the standard variable rate (without any discounts applied) is seldom the cheapest option, refinancing can help you achieve a better deal.
- Property Prices Have Gone Up: On average, property prices in Brisbane have increased by 7.5% over the past 5 years. This is good news for homeowners because a rise in property value can equate to improved equity. For example, when you first took out a home loan your equity may have been only 10%. But if the value of your property has gone up, then your equity may now equate to 20% or more (being the difference between the new lower balance of your home loan and the capital appreciation). This could make you eligible for improved interest rates on a refinanced home loan.
- You Want to Lower Your Minimum Repayments: With the recent RBA rate cuts, your current interest rate may no longer be providing you with the best deal. Refinancing to a lower rate can save you a significant amount. According to the free ASIC Mortgage Switching Calculator, if you have 20 years remaining on a $450,000 mortgage with a 4.5% p.a. interest rate, you could save $240 per month by switching to a lower interest rate (3.75% p.a.). That equals $57,602 over the life of the loan! And there are rates starting with a 2… so the savings could be much much more.
- You Need to Consolidate Debt: If you’re struggling with personal debt then refinancing can be a great way to consolidate repayments so they’re more manageable. It’s still important to consider immediate benefits vs. long-term benefits (will you end up paying less per month but more overall?) but by fully investigating your options you may still be able to refinance in a way that helps you now without costing you later.
- You’d Like to Use the Equity in Your Home: Refinancing can help you to access the equity in your home, enabling you to carry out those long-awaited renovations or perhaps even invest in an investment property. However, borrowing above an 80% loan to value ratio (LVR) will require you to take out lenders mortgage insurance. But we can always get your property valued to work out what the impacts are – so you can make an informed decision.
If you’re unsure of your borrowing potential, or have any questions around the above then feel free to reach out for a no obligation chat with the experts at North Brisbane Home Loans on Ph: 07 3889 9719.