Here are 5 reasons why now might be the best time
When COVID-19 first hit our shores, the first thought in many homeowners’ minds was paying their mortgage. By the end of 2020, most of us had spent more time at home than ever before. While the world has changed significantly over the past 12 months, is it possible that there is some good news?
When interest rates drop, it’s quite normal to see an increase in home loan refinancing. People refinance their mortgages for all sorts of reasons, but that doesn’t mean it’s always a smart move. Getting a better interest rate than you have already is only one piece of the puzzle – there are several others.
With such a big boom in the market, it’s tempting to jump on the refinance bandwagon too. Here are five reasons why right now could be the best time for you to refinance your mortgage:
1. Reduce your monthly repayments
The past 12 months have taught us that a lot can change in the blink of an eye, and even under normal circumstances, the lending market can change dramatically. Fixed interest rates have dropped to new lows in the wake of COVID-19, which, for borrowers struggling to meet their repayments, could be the break they’ve been waiting for.
You may have lost your job and be on the hunt for new employment or had your hours cut back at work. In this instance, refinancing your mortgage could lower your monthly payments – giving you time to get back on top of things.
2. Consolidate your debt
For some borrowers, streamlining all their debts into one payment can be a powerful tool for getting out from under the heavy burden of debt – and for that reason, refinancing can be a worthwhile move.
Combining your debts – including credit cards and personal loans – and then refinancing, means all your debts will be charged at your home loan interest rate. These rates are much lower than credit card rates – and you might even be able to pay off your debt faster. Just make sure you have a plan of action – you don’t want to rack up even more debt in the process.
3. Lock in a lower interest rate
There’s a reason why this is often the most popular reason for refinancing. Fixing a lower interest rate means reduced monthly repayments and less interest paid overall – if you refinance correctly. Before you sign on the dotted line, make sure you’re getting the best of both.
4. Upgrade or invest
This option may not be suitable for all homeowners, but if you’ve been considering buying an investment property or renovating your existing property, refinancing now could prove to be of huge value.
A cash-out refinance – where you refinance your mortgage and borrow money at the same time using the equity in your home – could free up the cash you need to make repairs, add a new room or invest in a second house. It’s a risky move, but one that could increase the value of your property portfolio down the track.
5. Now is as good a time as any
Depending on your financial circumstances, right now might be the best time for you to refinance. Even so, you’ll still need to apply – nothing is guaranteed. Find out how much money you might save by refinancing, and factor in the fees it will cost to go through the process. Before you make any decisions, ask your mortgage broker for an assessment of your current situation and if refinancing is the best card to play.
Play the long game
Deciding to refinance your home loan takes careful consideration. While it might seem like everyone else is rushing to the bank to take advantage of lower interest rates, don’t get caught up in the frenzy. Take a step back and work with a mortgage broker who will assess your financial situation – and determine whether refinancing is strategically the best move for you.
The Global Finance team know their stuff – get in touch with them today to see how refinancing could help you with your home loan obligations. Call us on 09 255 5500
**These are general guidelines and are by no means a reflection of bank or lending policies