Should I look to refinance my home loan?
In today's ever-changing financial landscape, the topic of refinancing your home loan is more relevant than ever. With interest rates on the rise, many of you may be wondering if refinancing is a good idea. Well, we're here to assure you that it can indeed be a smart move!
When interest rates are on the rise, refinancing your home loan presents an excellent opportunity to save money over the long term. As we are seeing now, higher interest rates can lead to higher monthly mortgage payments, which can put a strain on your budget. By refinancing at a lower rate, you can significantly reduce your monthly payments, freeing up more cash for other important expenses or savings.
One of the most attractive aspects of refinancing in a high-interest rate environment is the ability to switch from a floating mortgage to a fixed-rate mortgage. Floating mortgages might have started with lower interest rates, but as rates increase, so will your monthly payments. By refinancing to a fixed-rate mortgage that fits with your long term goals, you'll enjoy stability and peace of mind, knowing that your interest rate and monthly payment will remain consistent throughout the loan term.
As interest rates rise, so do the interest rates on credit cards and other debts. By refinancing your home loan and using the equity to consolidate high-interest debts, you can pay off those debts and replace them with a single, lower-interest mortgage payment. This not only takes away the stress of multiple repayments, but also saves you money in the long run.
Refinancing your home loan in a higher interest rate environment can be a strategic move to strengthen your overall financial position. It allows you to optimise your mortgage terms, reduce your monthly expenses, and even improve your credit score if you manage your finances responsibly. A strong financial position can open doors to other opportunities, such as obtaining better loan terms on other types of loans or gaining access to competitive financial products.
Refinancing your home loan in a higher interest rate environment can be a good thing to consider. It offers the chance to save money on monthly payments, secure stability with fixed rates, and simplify your financial life through debt consolidation. You'll also be taking control of your finances and strengthening your overall financial position.
However, before proceeding with refinancing, it's essential to thoroughly research and compare offers from various lenders to ensure you're getting the best deal. It is not only important to secure a good rate but also sound advice around how long to fix your mortgage for and an understanding of how interest rates actually work. This then enables you to make more informed decisions and also allows you to potentially split your loan for risk mitigation, if required.
By using a mortgage advisor such as Loan Market, we can also look at interest-only repayments if necessary, or given the high interest rates, now is a good time to repay more debt if your budget allows. It is better to be saving 7% on your mortgage than earning generally <3% in your savings account.
We can also provide forecasts of how much money you can save with as little as an extra $100 per week on your repayments, showing it can lead to saving hundreds of thousands of interest over the loan term and reduce the loan by years.
Get in touch with our Queenstown and Wanaka based mortgage advisors today and let’s see if refinancing is right for you in the current conditions.