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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....
Refinancing - 5 min read
With interest rates dropping, you may hear rumbles about refinancing. And for good reason. If you can secure a lower interest rate on your mortgage, you could potentially save thousands of dollars over the life of your loan.
In what circumstances should you consider a refinance?
If any of these sound familiar to you, read on. Refinancing could be a solution to your concerns.
By lowering the amount of interest you owe every month, you can reduce your payments or pay your loan down faster. Of course, this is only possible if you can obtain a lower interest rate than you currently have. This may happen for a couple of reasons.
If you got your original loan at a time when market interest rates were higher, you could capitalise on today’s lower rates.
If your credit score has improved since you first secured your mortgage, you may be eligible for lower rates and superior loan terms.
If your financial situation has improved, you may be able to spend more on your loan repayments each month. If this is the case, you could feasibly shorten the term of your loan, say from 30 years to 25 years. Although your payments may be larger, you would be spending less on interest.
Before you jump into a refinance, crunch the numbers, consulting with your wealth adviser, to determine whether or not the change is worth the closing costs. Although you probably won’t have to pay closing costs with cash, these expenses can set your debt back several thousand dollars.
If you determine that the refinance more than makes up for the closing costs, it’s time to proceed. But what’s involved?
The loan application process for a refinance is usually quick and painless. You’ve already done the heavy lifting with your original loan. Your new lender will also need much of the same information, but you probably have it centralised due to your current mortgage.
Your new lender needs to verify your employment information, credit and other key indicators that you can repay the loan in good faith. Gathering and submitting these documents usually takes a couple of days.
Next, prepare for an appraisal of your home. The new lender needs an eyes-on inspection of the place, though you don’t need to go to any trouble. The evaluation helps the lender to determine the current market value. You may be surprised at how much your home has appreciated since you first purchased it.
Refinancing generally takes much less time than initial loans. Within a few weeks, you will have a new loan with a lower interest rate, and your payments may be significantly lower! Use this change in your finances to analyse your overall financial health and goals. This may be an excellent time to meet with your financial adviser to set new goals or reevaluate your progress.
As always, keep an eye on your investments, including your primary home, so you don’t miss out on opportunities or overlook potential problems.
To discuss refinancing with an Altus wealth adviser, or to talk about any of your financial plans, get in touch with us. We can offer a sounding board for your future goals and help you put your ideas into action.
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Altus Wealth Pty Limited ABN 55 649 956 212 is an Authorised Representative of Altus Financial Services Pty Ltd ABN 24 637 026 825 an Australian Financial Services Licensee (AFSL no. 520266). Altus Financial Services Pty Ltd is not responsible for the advice, products and services provided by Altus Accounting. Julie Azzi is a credit representative (CR No. 366834) of BLSSA Pty Ltd ABN 69 117 651 760 (Australian Credit Licence 391237).
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