Refinancing

Flexible home loan refinancing to suit your needs

If you’re a homeowner and considering a new loan, Reventon can guide you to the best deal that works for your financial goals.

What is refinancing?

 

Refinancing is when a homeowner pays off their existing home loan and replaces it for another. There are many positives to refinancing as a financial planning strategy, including lower interest rates, equity release options, and shorter repayment terms.

 

It pays to do your research if you are considering refinancing your home loan or your property investment home loan. By looking at the bigger picture, including checking whether any fees or charges apply, you can ensure that you are benefiting financially in the long run.

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Why refinance your home loan?

 

Many homeowners purchased their property a number of years ago with a home loan that suited their lifestyle. Changes in circumstances can mean that these home loans no longer represent the best deal out there, so it makes sense to shop around and see if there is a more competitive loan on the market.

Secure a lower interest rate

Reducing interest rates on a loan can be one of the most effective ways to save money on both your monthly repayments and on the cost of the loan over its lifetime. If you signed up to a particular interest rate ten years ago, you might find that rates can be much more competitive today. Or if you signed up to a 5-year fixed rate deal and your interest has just increased after the initial term, you may benefit from shopping around.

 

We advise that even lowering your rate by 1% could be worth the change. For example:

Neil has a home loan interest rate of 4.8% on a $250,000 balance, paying $1,433 each month over 25 years.

 

If he switches to a 3.5% rate, his monthly payments will fall to $1,252, saving him $54 280 over the lifetime of the loan.

Shorten your loan term

Shortening your loan term is another reason why many people look to refinance their home loan. Perhaps your circumstances have changed since you first took out your home loan and you can afford a higher repayment rate – for example if you have progressed in your job or you have a partner who is contributing. By refinancing and shortening your loan term, you could be debt free quicker, and pay less interest in the long run.

 

Even if you don’t have extra money to pay, shortening your loan term may still be an option: if interest rates are favourable compared to when you first took out your home loan, you can use this to your advantage by shortening your loan term without paying extra each month. For example:

Amy’s current loan interest rate is 6% with a $175,000 balance, paying $1,128 each month over 25 years.

 

Now that interest rates are lower, Amy secures a new loan deal with a 3.5% interest rate, meaning she can change her repayment term to just 15 years, paying $1,252 each month.

 

With a simple refinancing strategy, Amy will be mortgage free 10 years earlier and gains a huge $113,070 from interest savings across the lifetime of the loan.

Convert your loan type

Many people look to refinance as a way to convert their loan type from variable-rate to a fixed-rate mortgage. This is particularly popular where the economy experiences a significant shift over the course of a loan period, and homeowners see opportunities to either benefit from low interest rates, or fix their home loan rates before an anticipated rising of interest rates.

 

Variable-rate mortgages generally offer lower rates than fixed-rate mortgages as they are dependant on an index that could change substantially across a number of years. To gain the stability of a fixed-rate mortgage, you may be paying a little extra each month.

 

Whether you would like to move to an variable-rate or fixed-rate home loan deal depends entirely on your financial circumstances and your ability to respond to potential rises in interest rates. We suggest speaking to a professional and shopping around for a number of options before making any decisions.

Refinancing to release equity

 

Refinancing to release equity from your home should be approached with caution. You are essentially borrowing more money against the value of your home, which means you are getting into further debt that will take longer to pay off.

 

However, there are many popular and valid reasons to release equity from your home, for example you may be looking to complete renovations that could increase the value of your property, or you might use equity release as a way of consolidating your debts.

 

One of the top reasons to refinance and release equity in your home is to gain initial capital to purchase an investment property. Many homeowners find this is a sound method of generating wealth in the long run, with a wealth building investment plan.

 

We highly recommend gaining professional advice before considering releasing equity from your home for any reason. A Reventon expert can discuss your financial goals and reasons for considering this route, before guiding you through all the possible options available.

Refinancing an investment home loan

 

If you already own an investment property, you hopefully are seeing the financial benefits as your investment increases in value. You may even be considering purchasing another investment property after seeing your first perform so well. At Reventon, we encourage our clients to continue reinvesting and carry on their journeys towards financial independence.

 

If you have received sound property market advice and a comprehensive investment strategy, your investment property will have increased in value since you bought it. You can then refinance your investment property and use the extra equity to purchase a new property. This way, you are taking on far less risk or personal sacrifice to purchase your second, third or fourth investment property.

 

Before refinancing your investment property, you must ensure that you are able to afford it. This isn’t simply the deposit you’ll be required to put down, but also your investment property home loan. You should have a full financial strategy in place for unexpected scenarios such as your property being left vacant for a period of time, or your personal financial circumstances changing.

 

Speak to a Reventon expert to talk through your current finances and the options available to you for refinancing on your investment property.

Refinance with Reventon

 

Whether you’re refinancing your home loan or investment, our expert knowledge of the finance industry will ensure you make the right refinancing decision.

 

Our team of financial and property investment experts can:

  • Determine your borrowing capacity and costs of refinancing
  • Organise and process all the paperwork
  • Negotiate the most competitive rate of your behalf

 

Discover the best refinancing route for you, book a meeting with an expert.

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