After years of servicing your home loan, there’s nothing more disconcerting than discovering that an alternative product exists that would have suited you better, saved you money, and possibly many sleepless nights.

Sticking with one product or lender is a thing of the past; in a highly competitive market, it makes sense to regularly explore other options to make sure you are taking advantage of the best deal.

Refinancing your mortgage doesn’t need to be a complicated process – sometimes it doesn’t even require changing banks.

Benefits of Refinancing

There is a ‘grey area’ surrounding refinancing one’s mortgage, and with an everchanging market, the mortgage you took out three years ago is unlikely to be the best product for you today.

Below we cover a few of the benefits associated with refinancing and aim to help you identify what it could mean for you.

Lower Rates

There’s a lot of RBA and interest rate related hype in the media, but it’s important to note that lenders use different methods and channels to set their rates. It pays to do your research when it comes to the different interest rates on offer and how you can access them.

A lower interest rate could mean lower repayments (more money in your pocket), a shorter lifetime of your mortgage, and/or a lesser sum of total interest paid.

Shortening the Life of Your Mortgage

A change in circumstances, a pay rise, or lucky lotto ticket might land you in a position whereby you can afford to pay off your mortgage quicker.

Some home loan products have boundaries within their terms and conditions that do not allow you to shorten the term of your loan or make extra repayments without penalty. For this reason, you might look at refinancing your mortgage to allow for more freedom surrounding your repayments and loan term.

Better Features

Like having the option to make extra repayments, there are a range of other loan features available that you may previously not have had a need for, or simply weren’t aware of. It’s worth investigating what other home loan products are out there and what features they may have that could be better suited to your current circumstances.

Offset accounts, redraw facilities, repayment holidays and loan portability are just a few of the features that exist in the home loan market that may be of benefit to you.

Debt Consolidation

It is not uncommon for one to have a personal loan or credit card account in addition to their mortgage. In certain instances, it can be beneficial to look at the idea of consolidation your debts. The main benefit of consolidating your debt into your home loan product is saving money on your total monthly repayments and/or on interest rates which are often significantly higher amongst other lending products, especially if unsecured.

As most lenders have different rules surrounding the idea of home loans and debt consolidation, one may look at refinancing purely for this purpose.

Car loans and personal loans are financed over a shorter period than a home loan and careful consideration should be taken before consolidating into a longer term.

When to Consider Refinancing

As previously mentioned, the highly competitive and continually changing market is a good reason to stay up to date with what products are available – to ensure you’ve got the best option.

But, here are some other reasons you might want to consider refinancing your mortgage:

• If you were on an introductory rate
• If your personal circumstances have changed
• If you’re coming to the end of a fixed term
• If you’re looking to do renovations
• If you want to invest in more property
• If you aren’t satisfied with your current lender for whatever reason
• If you have an ageing loan

Final Words

Although there are upfront costs and potential fees associated with refinancing your mortgage, it is important to think about the big picture and assume a long-term view.

In a sea of lenders and products, each with their own advantages and disadvantages, it can be daunting when it comes to understanding what mortgage is best for you. For this reason, it is best to consult a professional when considering refinancing, who has a complete knowledge of the market and the common unidentified drawbacks associated with various mortgages.