Refinancing & Consolidating Debt

When people think of refinancing, they’re usually thinking about getting a lower interest rate or accessing their equity to buy something (a car, a jetski) or invest in something (a renovation or to purchase another property).

Other reasons to refinance include consolidating debt by adding personal loans like a car loan or credit card debt to improve cash flow and improve a credit score.

Key points about refinancing:

  • Refinancing is paying out your current home loan through getting a new loan.
  • It can be the same lender or a new lender.
  • It can be for a new term length (shorter—pay off quicker; or longer—to reduce the interest component of repayments to free up cash flow).
  • It can be to change up the structure and packaging (splitting, fixing, account offsets etc.).
  • It can be to get a lower interest rate and to access property equity.
  • It could be just to get your ducks in a row by consolidating debt.

Refinancing with the lender comes with some standard refinancing costs/fees. Beyond getting a better deal that offsets the refinancing costs, some lenders offer a cash back.

Getting a better edge on your finance must go beyond just looking “good on paper” though. A better rate on a variable interest rate moves the starting point for repayments and could just be a temporary gain. This is where your mortgage broker can help. We help to build the big picture so you can assess and decide properly.

It’s also important to flag that refinancing impacts your credit score, if only in the initial or short-term of switching to a new loan. We say this to make you aware and consider if other finance needs could be popping up on the horizon.