The beginning of a new year is a good time to review your household budget. Perhaps you’ve overspent during the festive period and your debt has mounted up. You may be considering debt consolidation or other ways to cut back on expenses. If you’re struggling with debt or you find yourself constantly borrowing money from family or friends, it’s time to take control of your financial situation. Refinancing your mortgage could be the solution.

Should I refinance my home loan?

Refinancing your home loan and consolidating all of your debt into one loan can help in a number of ways.

Replacing a shorter loan with a longer loan lowers the repayment instalments, but as it takes longer to repay the loan, it will cost more in total.

Refinancing lowers your monthly repayments so you could use the money you save from your refinance towards making extra principal payments to clear your debt that much quicker.

Before making any decisions, it’s important you analyse the long and short term costs and benefits associated with refinancing. Your Mortgage Express adviser can help you with this.

Are there any costs?

Unfortunately refinancing your home loan usually comes at a cost. Often an exit fee will be charged as well as an application fee, broker fee, lender’s fee and any duties or taxes payable on the new loan.

While consolidating your debt and refinancing your home loan means you’ll pay a lower interest rate than your credit card, stretching it out over 25 or 30 years does mean more interest repayments over the life of your loan. Making additional payments into your home loan will help you clear your debt faster and reduce the total amount you have to pay back.

How do I refinance?

Shopping around is key to getting a better deal. If you do decide to refinance your home loan, get professional, unbiased advice from your mortgage adviser. Compare home loan options by looking at rates, terms and features to ensure you’re getting the best deal.

What are the pitfalls I need to avoid?

Take a look at our tips for refinancing your home loan without any drama:

• Assess your situation: before making any decisions consider whether consolidating your debt will help get your finances back on track. Weigh up the costs and benefits to ensure you’re not left in a worse situation if you decide to refinance.
• Get the right advice: deal with registered mortgage advisers or brokers and read the paperwork before you sign anything.
• Talk to your existing lender: before you shop around, consider negotiating a better rate with your existing lender.
• Get your debt under control: consolidating your debt is a smart way of managing your debt. But equally important is taking control of your spending with a little discipline. Resist the urge to spend on the credit cards you’ve just cleared.
• Write up your budget and stick to it: if you can afford to, make extra payments into your home loan to pay off your debt faster.

Make informed decisions

Refinancing your home loan and consolidating your debt can save you money. But it’s important you carefully assess your financial situation before making any decisions. If you’d like advice and help in choosing the right home loan, get in touch with a Mortgage Express adviser.