Refinancing is THE buzzword in the mortgage industry right now. But what is it, what can it do for you, and when should you do it?
Back in November 2022, refinancing hit an all-time high in Australia (according to data from the Australian Bureau of Statistics). This occurred on the back of multiple interest rate rises leading to increased pressure on family and business budgets, leading people to go looking for better deals on their mortgage.
What does it mean to refinance?
In simple terms, refinancing is the process of swapping an existing loan for a new one with different terms and rates (with the idea being that they are better terms and rates for your situation). With a large number of mortgage holders rolling off fixed rates in the early months of 2023, as well as rate rise after rate rise after rate rise, the refinancing figures reached in November last year are widely predicted by those in the industry to continue.
Refinancing your loan can also consolidate your debts into one repayment, providing you with a more manageable cash flow and enabling you to get on top of your debt cycle. As well as this, refinancing can provide an opportunity for you to look at the features of your current loan that you are not utilising and perhaps no longer need, switching to a more suitable loan that can save you money on the ‘bells and whistles’ that you’ve since discovered you didn’t really need to be paying for.
When should you refinance?
How do you know when to refinance? Well, the (very) short answer is now. After nine consecutive interest rate rises, almost every mortgage holder is feeling the pinch, with reported rates of ‘mortgage stress’ also on the increase. If you’re struggling to stay on top of your mortgage repayments, you have found yourself with too many payments to keep track of, or you want to free up some equity, then refinancing is likely a good option for you.
It can be a detailed process, the basic outline of the process will be:
- Identify and understand the needs of the client – what do you need to achieve in order to come out in a better position than you are currently in?
- What will the costs of refinancing be – there will be costs to exit your current loan, and costs to enter a new loan. Will you still come out on top after these are factored in?
- Look at the options – this is the most crucial part for which an expert broker will be required, as there are so many loans and lenders out there to choose from! A broker will know available loan types, suitable lenders, and which loan offers which features (such as redraw facilities, optional additional payments, etc).
If you would like to see if refinancing is the right move for you, contact us to discuss what this may look like for you.