REFINANCING YOUR LOAN.

Maybe you got your mortgage six months ago. Maybe it was five years ago. Either way, it’s always good to keep in mind that you do have the option to update it to suit current conditions. Doing it could help you get a lot more money back in the pocket than you realise.

Interested in rates

Refinancing your mortgage generally comes to down one main thing: lower interest rates. If you could lower the interest rate on your current home loan it would mean less to pay on your repayments. All you have to do is wait until interest rates are low. Simple right?

Not always. There are expenses attached to this decision and could end up costing you more than you save if done blindly. Choosing whether to refinance your mortgage requires knowing the financial landscape and forecasting the movement in interest rates.

Doing homework

There are several factors that influence the interest rates set by financial institutions. The cash rate plays a major part, which is decided on every month by the Reserve Bank of Australia (RBA). If you obtained a fix-rate loan before the cut, you may find it an opportune time to refinance it to enjoy the low interest rates. On the flip side, if you believe the cash rate may drop further, it could pay to stay your hand.

Clearly, it’s important to do a little research before making the plunge. See what the financial world is predicting to get a better picture. If the economy is still in need of growth, it’s a good sign that the cash rate will drop, if not already low, and vice versa.

Variable and fixed rates

If interest rates are currently low, you may find it beneficial to lock in the savings by refinancing your mortgage earlier rather than later – especially if they’re forecasted to rise (once again, homework). The best way to do this is to reconfigure your variable-rate loan into a fixed one.

On the other hand, converting to a variable home loan can be a smart decision if you’re seeing declining interest rates. This way, you’ll get to reap all the savings from falling rates straight out of the gate.

Making an informed decision

Maybe you’ll make huge savings by refinancing your mortgage or maybe you won’t. Either way, it’s like wondering whether the funky-smelling chunk in the fridge is blue cheese or just mouldy; it’s always best to check rather than make an assumption.

Chat to the Fountain Finance team today, to learn more about refinancing and discover the right deal for you, right now.