...and how to pay off your mortgage years faster and improve your lifestyle
Do you need extra money to buy a car, boat or holiday?
Would you like to consolidate your debts, lower your repayments or own your home sooner?
If so, then refinancing may be an option for you.
What is refinancing?
Refinancing simply means to change loans on different terms and often involving the paying off of an existing high interest loan by means of a new lower interest one. This can be with the same lender or with a new one. There are several reasons you may choose to do this. And of course, it should always be to your benefit.
With the selection of loans and home loans currently available, many people are choosing to refinance their existing loans to take advantage of additional benefits and incentives offered by other lenders.
Consolidating your loans is a popular thing to do when refinancing. This is when you combine all your debts into one convenient loan, where you generally end up paying a lot less per month in repayments than what you currently are.
Some benefits of refinancing are:
Lower interest rate or more favourable loan terms
Consolidation of your credit card and personal loan debts into one loan with one repayment
Bring debt relief by reducing monthly repayments. The negative in doing this is that if you pay only the reduced payment required by the consolidated loan, your loan term will stay the same or in many cases be extended. At Asset101 we recommend that when you consolidate your debts, you continue to pay the same repayments as before. That way, you will pay off your new loan a lot earlier!)
Can help you achieve debt reduction and mortgage elimination sooner
Gain the advantage of other features offered by the new product
Switch from a fixed to variable rate loan, vice-versa or even both
Access the equity in your home to use for renovations, holidays, other investments etc (or even to have a facility ready to do these things).
Switching loans, lenders or both can be beneficial. To assess if you’re likely to benefit from refinancing, ask yourself:
Am I happy with my lender or lenders?
Do I need reduced or added features with my loan?
Am I paying too many bank fees?
Are the interest rates I’m paying too high?
Have my financial circumstances changed?
The answers to these questions are usually answered best by your broker because they usually know your situation best and there are other things to take into consideration such as Deferred Establishment Fees, what your future goals are etc. By consolidating your debts into your mortgage you only have to make one payment instead of making numerous payments. In addition, you may end up paying less per month than what you currently are. This can help some people to manage their finances more effectively.
Many lenders recommend you to consolidate your loans to ease your financial situation. That is, they recommend you to combine your car loan, credit cards and other loans with your mortgage to save you paying the high interest rates charged by credit card and car loan companies.
The danger is unless you change your financial habits, you can end up in the same position very quickly.
We have seen this time and time again, that in 2-3 years people wind up in exactly the same position as they were before refinancing. In fact, they are worse off because they now have a loan that is over a longer term than their old one. And this cycle continues time and time again and before they know it, they want to retire and still have debt on their home.
Ultimately it depends on how you manage your mortgage and other loans once you have refinanced to achieve the benefits of refinancing.
Essentially if you use the money freed up by the mortgage refinancing to pay down the loan amount owed, then you would achieve significant financial benefit. So, if you want to pay out your mortgage faster, you’ll need to make extra repayments, on top of the interest and principal payments that you are now making. Mortgage refinancing can free up this money to do just that, but you must be disciplined to achieve the goal of being debt-free sooner.
Important points when consolidating debts into your mortgage:
Make sure you put together a budget that you can stick to
Pay the loan amount down in a consistent manner
Make extra loan repayments with any extra money you have through the refinance
How can you make the most of refinancing?
Asset101’s Financial Coaching Program is a proven solution for you to manage your money on a higher level to pay off your home, other debt and achieve your goals in a fraction of the time.
With the combination of effective cash flow management and monthly coaching sessions, our program will help to keep you focused, provide an objective perspective and keep you accountable to stay on track for your debt elimination goal. Your coach will show you exactly how well you are progressing against your objectives. Asset101 charges a flat fee which means you can easily assess the value of the coach based on the monthly results being achieved.
Here is an example of a real client’s progress report after just seven months on the Asset101 Financial Coaching Program:
In just seven months on the Financial Coaching Program, these clients have reduced their mortgage by $28,218 more than they would have without the program!
* The information contained in this report is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs.
Want to get serious about paying off your debt or saving more money?
Book a complimentary appointment with us online, or by calling us on 08 7200 7228.