Following more than 11 interest rate increases since April 2022 and with the nation’s cash rate now at the highest in a decade, Australians are looking for a better loan deal at a rate like never before.
BDJ Loans Director Chris Brown says there are a number of reasons why now is the right time to look at refinancing*.
“The Banking Association is currently receiving up to 2,500 requests a day to refinance with most people looking to reduce their interest rate by switching lenders. Refinancing your loan can provide several benefits especially if you are coming off a fixed rate or interest only loan period. Refinancing can also be beneficial for extracting equity for renovations or for debt consolidation.
“At BDJ we have the benefit of being able to review your loans as part of a holistic financial position. Sitting down with your accounting, financial planning and loan teams as one, we can ensure we provide up to date and accurate advice that is best for your current situation.”
So when should you consider refinancing?
1. Rolling off a fixed rate:
Approximately 880,000 fixed-rate mortgages will come to an end this year, according to the Reserve Bank of Australia (RBA). For many homeowners this will see a dramatic change in their mortgage affordability as their rate increases. At BDJ we recommend reviewing your loans a few months before any fixed rate ends to ensure we can source the best possible rate for you either from your current lender or through a new lender via refinancing.
2. Coming to the end of an interest-only period:
Similarly, many investors and homeowners will be coming off interest-only loan terms this year and will once again see a significant increase to their loan repayments as they revert to principal and interest. Depending on your circumstances we can review securing a new interest-only loan or offer alternative options.
3. Extracting equity:
Refinancing can also offer new opportunities through extracting equity when your property has increased in value. This equity can be used for home improvements, further investments, a new car or purchasing an additional property.
4. Debt consolidation:
To improve overall cash flow, debt consolidation can be a very useful solution for the immediate term. By consolidating multiple debts such as a home loan, car loan and credit card into one you can reduce monthly repayments assisting your financial positioning in the near term.
Chris Brown continues, “There are some instances however, where refinancing may not be the right solution.
“When you refinance you will likely be resetting your loan back to a 30-year term which does mean while the rate is lower, interest will be paid over a longer period of time.”
*Refinancing refers to the process of paying out your current home loan by taking out a new loan, either with your existing lender or through a different lender.
Published 1 June, 2023