A refinance occurs when a business or person revises the interest rate, payment schedule and terms of a previous credit agreement. Debtors will often choose to refinance a loan agreement when the rate environment has substantially changed causing potential savings on debt payments from a new agreement.

A common reason to refinance a home loan is to find a cheaper loan. If you've been with the same lender for a number of years the reality is that what was initially a competitively-priced loan may now come with a less-than-impressive interest rate. You could be paying the banks extra money for no reason!



Increase borrowings

Often we refinance to use equity to renovate, purchase other properties or eliminate high interest debt - such as credit card balances. In general you will be able to extract equity through refinancing if the value of your property has increased since your previous loan was established.


Finding lower fees

You could be paying fees unnecessarily with your existing loan. If you are paying monthly or yearly fees, is it worth taking the time to investigate alternatives. You’ll often find that there are similar packages that have no ongoing fees.


To fix the rate or not to fix (the rate)?

You may have started with a variable rate loan, which suited your circumstances years ago. But today you might want to fix the rate during a time when you need greater stability - perhaps you're having children so you're reduced to one income. This can definitely be done.


You could reduce your debt faster

A home loan that has an offset facility could help you reduce the debt much faster. It's basically a transaction account linked to your home loan that decreases the amount of interest you'll pay. It's a popular approach for many home owners, saving thousands and potentially taking years off the loan, providing freedom earlier.