People always talk about refinancing. They all say, “you should refinance to get on a lower rate.” Seems to make logical sense, but what does this actually mean?

Refinancing is simple. Let us break it down for you with an example scenario.

Scenario A:
You have a current loan with Bank X, who is charging you 4.59% interest. You find out that other banks are offering lower interest rates. You then move your loan to Bank Y, who will charge you 2.98% interest instead.

This is refinancing; moving your loan from one bank to another.

The most common reason for refinancing is to get a lower rate and therefore, lowering your loan repayments to the bank. This is depicted in Scenario A.

There are other reasons to refinance. A few of these reasons are listed below:

• You may want to extract equity from your property. Your current bank is not willing to do this, although another bank will.

• Your current bank may not support your goals. For example, you may want to knock down an existing house, renovate or subdivide. Moving to another bank may allow more flexibility and therefore better suit your current goals.

• You may want to diversify your range of banks. After all, you should not have all your eggs in one basket.

• You may want to fix your rate or move to an Interest-only option. Moving to a different bank may help you achieve this.

If you are interested in exploring your refinancing options or still have questions about what this means, contact us and we will book you in for a consultation