What Are The Benefits of Refinancing Your Home Loan
Besides lifting the stress in having to pay several loans, with varying interests all at the same time, what are the other benefits of a home loan refinance?
Save serious dollars
Repay your mortgage faster
Unlock the powers of your equity
Get your finances on track
Unlock better features for your loan
Experience a better repayment scheme
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How Much Can You Save With A Mortgage Refinance
Refinancing a home loan may pop in your mind with the idea of getting better interest rates and payment terms for your current home loan. It is hard to comprehend how much you can save from a refinance if you do not actually understand how much you are already spending to repay your current home loan.
For a loan of $600,000 at 5% interest, to be paid for 30 years, you will need to pay $3,220.93 a month, with a total of $1,159,535 for the whole duration of your loan.
Say you secure a loan at 4.7% interest. You’ll be required to repay your loan at $3,111.83 a month, with a total lump sum interest of $520,258. That’s over $39,000 in savings. However, you should also include fees, rates, and charges that are included in terminating your current loan early as well as fees required to pursue a home refinance. If you arrive at an amount lower than your savings, you can give a home refinance a go.
However, keep in mind that it would be ideal to refinance your home loan with a shorter loan repayment to reap the benefits of paying a lower interest rate. A mortgage specialist can help you understand where you can actually accumulate savings when refinancing your home loan.
Repaying Your Mortgage Faster
Paying for interests alone costs you. If you plan to refinance your home loan, now at a lower rate, it would be ideal to keep your regular payments the same. This can be challenging but savings will not come along the way unless you apply this small sacrifices.
Refinancing your home loan with a shorter loan term gives you the advantage. Time is money. The longer your loan term is, the higher the interest you’ll have to shoulder to repay your loan. Minimizing the number of years you have to pay for your loan maximizes your savings.
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Unlocking Your Equity Through A Refinance
The equity of your property is the difference between the total value of your home and the amount you owe. At a simple glance, you might conclude that a $500,000 home loan with a loan balance of $460,000 has a $40,000 equity. This is not the case. The value of your home can increase or decrease as time pass. You will need to get an accredited service to perform a valuation on your property to determine the actual current value of your home before you could determine the value of your equity.
Refinancing your home loan has its advantages, talking with a home loan specialist helps you understand these advantages more and make the process easier for you.
Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today.!