What is the benefit of refinancing your mortgage? There are actually a number of them, which is why so many Australians choose to refinance.

The specific benefits of refinancing vary from person to person depending on their financial situation and goals, but below are some of the most common advantages:

Lowering Your Monthly Payments

One benefit of refinancing is lowering your monthly payments, primarily by getting a lower interest rate than your current mortgage. For example, if you initially secured a home loan at an interest rate of 5.80% and are able to refinance to a lower rate of 4.50%, your monthly payments will decrease. This will not only give you immediate financial relief but also increase your monthly disposable income, which can be allocated to other expenses or savings. Also, over the lifetime of your loan, even a slight decrease in the interest rate can let you enjoy substantial savings, potentially amounting to tens of thousands of dollars, depending on your loan amount and terms.

Paying Off Your Mortgage Faster

By refinancing to a lower interest rate, you not only lower your monthly payments but also get the opportunity to accelerate the repayment of your mortgage. This is because with lower interest charges, more of your payment goes towards the principal rather than the interest. This can significantly shorten the life of your loan. For example, if you were on a 25-year mortgage term, refinancing might allow you to adjust this down to a 15-year term, depending on how much you save on interest. This approach frees you from debt sooner and, at the same time, increases the equity in your property more quickly.

Getting Better Loan Features

Refinancing also allows you to get loan features that better suit your current financial needs and goals. As a borrower, you might find that your original home loan lacks features that could save you money in the long run, such as offset accounts, redraw facilities, or more flexible repayment options. For example, an offset account can significantly reduce the amount of interest you pay by offsetting the balance of your loan against the money in the account. Meanwhile, a redraw facility can provide flexibility by allowing you to withdraw extra payments if needed. Refinancing can often make these types of features available, which can offer you not just potential savings but also increased convenience and control over your finances.

Consolidating Your Debts

If you have credit card debts, personal loans, car loans and more, you can consolidate them into your home loan, usually at a better interest rate. This can help you manage your finances more easily by having just one loan instead of several outstanding loans with varying interest rates. This consolidation not only reduces the amount you pay monthly but also decreases the total interest you need to pay over the lifespan of your debts, potentially saving you a considerable amount of money.

Borrowing Extra Money

Another popular benefit of refinancing your mortgage is turning the value of your property into a lump sum of cash. This is called an “equity release”, and it means you can get money out of your house without selling it or moving out. You can then use that money for settling your debt, paying school fees or medical bills, renovating your house or purchasing another investment property, buying a car, or for any other worthwhile purpose. This flexibility can be incredibly beneficial if you need to cover large costs without resorting to high-interest loans or credit cards.

Improving Your Credit Rating

Refinancing your mortgage can be a strategic move to improve your credit rating, especially if it involves paying out defaults or judgements. By consolidating your debts and making regular, on-time payments on your refinanced loan, you show creditors that you are financially responsible and creditworthy. Each timely payment helps increase your credit score, making it easier for you to qualify for other forms of credit in the future under more favourable conditions. Furthermore, refinancing can reduce your total debt burden, which in turn can lower your credit utilisation ratio, which is a crucial factor in determining your credit score. 

Getting Lenders and Debt Collectors Off Your Case

You may be receiving regular correspondence and phone calls from debt collectors or lenders. In some cases, they will even contact you at your place of work or get in touch with your family or employer. Not only is this frustrating, but it can also be very stressful. Refinancing will solve this problem and get those lenders and debt collectors off your case. By refinancing all your debts into a single mortgage with potentially lower monthly payments, you simplify your financial obligations and reduce your likelihood of missing payments. This way, you can prevent debt collection activities from escalating, helping you reclaim your time, freedom, and peace of mind.

Has Your Refinancing Application Been Declined?

With so many potential benefits it offers, refinancing may be a smart option for your situation. However, recent regulation changes by the Royal Commission have made it more difficult to get loan applications approved in Australia. Many people get rejected even though they don’t have bad credit, often for reasons like having too many inquiries on their credit file. And if you have a poor credit history, some banks will flat-out refuse to let you refinance, causing stress and keeping you from living the life you know you can afford.

If you have been turned down by a bank, don’t worry. It is possible to refinance even if you have bad credit – the only catch is that it’s a complicated process that people struggle to do on their own.

We have helped thousands of people refinance quickly and successfully – even after they have been turned down by banks. We can help you, too.

Don’t live your life bound by the bank’s restrictions. Contact us today and let us show you what’s possible.