Depending on your location and how long ago you took out your home loan, your property has likely gone up in value – probably significantly so. Releasing equity from your home can have some major lifestyle and financial benefits (when undertaken with the proper financial guidance). But it also sets you up for ensuring you’re receiving the best rate for your current situation, which might have changed since you took the loan out – having kids, getting a promotion, divorce etc. can all mean it’s time to revisit your loan and finances.
Here are 8 major reasons to refinance your home loan…
1. Home upgrades
Releasing equity in your home to re-invest into your home can be one of the smartest and most enjoyable outcomes of owning your own home! Thinking of a pool, a kitchen upgrade or a garage renovation for a granny flat? All of these are possibilities, with the added bonus of adding even more value to your home.
2. Investment in other properties
Ever wonder how multiple property owners get to be in that position? With the right knowledge and guidance, they’re able to leverage one property against an investment property, and keep going. When done in a calculated and smart way, this can be an incredible opportunity for you to build generational wealth and security for your family.
3. Help out a family member
Equity release when you refinance can also give you the chance to help a family member out in the form of a family guarantee (i.e. your equity becomes the deposit for a new home for your grown up child for example). There are lots of factors to consider in this scenario and it’s not to be taken lightly but it can be a great option for both parties when done smartly.
4. Lifestyle changes
Whether you’ve gone through divorce, want to travel the globe for a few months (hello post pandemic world!), have a big medical bill coming up or want to help your kids with their uni fees – releasing equity in the home you live in can be a great way to do this.
5. Consolidating debts
Using the money you’ve been paying into your mortgage to pay off other debts can help you to manage your future finances even better. Having just one monthly repayment can also help you to focus on saving and future investment and help your credit score.
6. Improving your credit score
It’s likely that if you’ve been keeping up with your monthly payments, and not taken on any additional personal debt (such as Afterpay or credit card debts), your credit score has improved significantly. That means you could already be eligible for a better rate on your mortgage and this is often an overlooked factor by many homeowners.
7. Eliminate mortgage insurance
If you took out LMI (Lender’s Mortgage Insurance) when you bought your home, it’s likely that you’ve built up enough equity to eliminate that – and significantly reduce your mortgage payments (monthly repayments and the overall amount you borrow). This is a huge benefit for home owners and the sooner you can do this the better.
8. Cashback
Many lenders are offering significant cashbacks up to $6,000 for people refinancing. Cashbacks should never be considered as the only reason to refinance, but if you can do one of the above AND get up to $6,000 tax free then it’s certainly worth asking a broker to check out current deals that may suit you.
You might be worried about the interest rates increasing and thinking it’s not a great time to refinance right now – but the only way you can make a smart decision is by knowing your numbers, being clear on your goals and having the support in place to help you get there.
Let’s chat about your goals and numbers and see what the next best move is for you.
