A lot of people asked the question that “should you refinance in 2021? Refinancing your home loan can do more than just help save the repayments. Refinancing is also considered an important part of building a better financial future. With sufficient planning and preparation, it can be a beneficial financial strategy in the long term.
When it comes to refinancing, the first thing we think about is the interest rate. Without any doubt, interest rates are at historic lows following multiple RBA cash rate cuts. Several mortgage experts believe that the central bank’s record-low cash rate is a boon for many borrowers, so if you haven’t refinanced in the last 12 months, you could be overpaying.
But is this financial strategy really all about interest rates? Should you refinance in 2021? In this article, we’ll go through what you need to know about refinancing in 2021.
Will mortgage rates go up in 2021?
The RBA (Reserve Bank of Australia) has cut interest rates a few times since June 2019, and it decided to make further adjustments to a record-low of 0.1%. Plus, they indicated that they will not look to raise the cash rate for another 3 years.
So, 2021 might be the year to think about refinancing your mortgage. It’s smart to make the most of the low-interest rates while you can. For borrowers who want to keep these low rates for the next few years should fix their loan; however, if you still prefer flexible loan terms, the variable rates are what you should be looking for.
When is the perfect time for you & Should you refinance in 2021?
Every borrower’s financial situation is different, refinancing may not be the best move for everyone. Before deciding on this, it’s wise to carefully assess your current financial situation and think about other reasons for refinancing. As a general rule, this move is making sense to you if you have any below instances.
- Your current rate is no longer competitive
With interest rates dropping to historic lows, your current interest rate may no longer competitive. You should consider refinancing to get a better interest rate, especially if you are at the end or near the end of your fixed term.
- You want to change of loan product
Do you know you can change the loan product when you decide to refinance? People will experience different financial circumstances so as the loan and the market. Depending on your financial situation, you can choose to optimize your financial benefits through simple loan products switching.
- Your financial or personal situation has improved
If your credit ratings have improved or your income has increased, you should consider refinancing so that you may qualify for a lower interest rate or you can reduce the loan repayment term. The shorter your loan term, the less you’ll pay in interest.
- You got personal debts to payoff
Do you know you can pay off your personal debt easily by having it refinanced into lower interest rates! With loan refinancing, you can pay off your credit cards, personal loans, personal overdrafts, and car loans under your mortgage, as a single repayment of your home loan.
- You need some equity for other investments
Do you know you can borrow against the equity in your property if you get your mortgage refinanced, the lender may refinance your existing loan based on the current value of the property. It’s time to use this equity if you need funding for children’s education, a new car, family vacation, home renovation, or investment property, you can tap into your equity via cash-out refinancing.
How much could you save by refinancing?
It’s no secret that a low-interest rate is a key to making big savings on your mortgage. Even if you only secure a 0.5% interest rate decrease, you could still save substantially. For example, if you had a $350,000 mortgage with a 3.0% interest rate and a 30-year loan term, your monthly repayments would be approximately $1,475 per month. If your interest rate reduced to 2.5%, you’d pay about $1,382 per month.
This would give you an extra $93 per month to invest, save or spend on something you like. It doesn’t seem like much, does it? But it could make your life easier.
Got a home loan question? Contact us!
I hope with the above-mentioned explanation, you will be able to answer the question that “should you refinance in 2021?” We’re here to help if you have any home loan requestions. Contact us now to get free expert advice from our mortgage experts.