First up, what is refinancing?
Refinancing your home loan means changing your existing loan for a new one and in most cases, with a new bank. The two main reasons people look to refinance their home loans are either to get a better rate or to increase their existing loan to withdraw some home equity.
1) I want to reduce my home loan repayments
If interest rates have changed since you got your original home loan, you may be able to refinance to a new loan with a lower rate. By refinancing your loan you can also reduce the amount of interest you pay. Reducing monthly repayments ultimately means you will pay less over the life of your loan.
2) My property has increased in value
Broadly speaking, property prices in Australia have increased over the past 5-7 years. If your property’s value has gotten a boost, you might be able to refinance and get a better rate.
3) I want to increase my loan and take cash out
A cash-out refinance allows you to use the equity you have in your home to borrow money at a lower cost. You may want to invest these funds into shares or use it as a deposit towards a new investment property.
4) I want to do some renovations
After you’ve been in your home for a few years you might feel its time to do some renovations. These generally fall under two categories: simple renovations, like adding air-conditioning, solar panels or painting and structural renovations, like adding an extra level to the house, a pool or new kitchen.