Drag down housing refers to the ongoing decline in property values in Australia. In a report from CoreLogic, the country’s annual drop dips to 3.5 per cent, prompting concerns from economists and the potential to further decline, derailing the economy. However, even during the most significant fall since 1990, homeowners now have the option to refinance their mortgages. But why should they do it? Here are some ideas.
1. Lower Interest Rates
Interest rates are at an all-time low. If you’re a borrower, this is the perfect time to refinance and reduce your monthly costs. One benefit of refinancing is lower interest rates. If a homeowner has a loan at say, 6 per cent but there are lenders out there offering 3.5 per cent, then it makes sense to refinance. Homeowners can lock in their rate of 3.5 per cent on their existing loan, or a new one, and spend billions less on interest over the life of the loan.
2. Reduce Monthly Costs
A lower interest rate isn’t the only advantage of refinancing. It can also reduce your monthly repayments. When you refinance your loan, you can also pay off your loan faster if you so choose. Or, if you’re just not in a position to pay off the loan any quicker, you can lower the amount of money you pay each month. This is particularly useful to homeowners who have got an interest-only loan, who can refinance to an interest and principal loan.
3. Access to Bigger Loans
Refinancing can also help you access loans that are bigger than what you currently have. If you want to buy more home or buy a different one, it’s a good idea to refinance. If you have a small loan, it may not be worth it to take on more debt. However, if you have a big loan, you can pay off your existing one and take out a new one. This means that you can use the same amount of money for a larger loan, or even to pay it off and own the house outright.
4. Increase Liquidity
Refinancing helps homeowners access more liquid cash. For example, if you have a debt with a high interest rate that you’re not paying off, it will remain in your account, not earning money or giving you access to cash. You can refinance it and use the money elsewhere. For example, you can use it to pay off debts, to invest or to take a holiday.
5. Avoid Default
If you can’t afford your loan, you are more likely to default on it. Having a debt that you can’t afford to repay can cause severe problems for you and your family. If you can’t meet the repayments, the debt will not go away. It will just increase. But if you refinance your loan and put that money to work elsewhere, you won’t have to deal with default.
6. Futureproofing
When every lender is competing on price and rates, it’s a great time for homeowners to refinance. If you’re worried about how the mortgage market will perform in the future, it really doesn’t pay to just sit on your hands and wait for interest rates to drop. Get in there and make the most of the situation now, to give yourself a great financial future.
Conclusion
Whether you want to reduce your monthly repayments, access larger loans, pay off your debt sooner or avoid default, refinancing is a great idea for mortgage holders. Not only does it open up a world of opportunities, it can also help you get out of the financial hole you’ve found yourself in.
Wealthy You offers the best home loans in Sydney. Our goal is to help Australians get the best value for their money in buying a home. Therefore, we provide flexible yet affordable home loan options for those who qualify. We also offer investment lending to clients needing financial support to power up their ideas. Speak to a mortgage broker in Sydney today by booking an appointment through our website.
