3 ways refinancing your home loan can reward you
Saving money with a lower rate, getting out of debt faster and unlocking home equity are excellent refinancing rewards.
Sponsored by Unloan. With Unloan, you can get a home loan that rewards you every year. A rate that gets better, with no negotiations needed. Every year you're with Unloan, you'll receive an automatic discount of 0.01% p.a., for up to 30 years.
Most of us think of a home loan as a big, lifelong debt. But if you treat your home loan as a flexible financial tool you'll suddenly see how useful it can be. And one of the best ways to make sure your home loan is really rewarding you is by refinancing to a better one.
1. Get rewarded with a lower rate
Getting a lower interest rate is one of the best reasons to refinance your home loan. However, some lenders may save their best rates for new customers – which means loyal customers often miss out!
You can ask your lender for a discount. But switching to a new lender could get you an even better deal.
Even a small difference in your rate can have a massive impact. On a $600,000, 30-year home loan, the monthly repayments on a 5.99% p.a. interest rate are $3,594.
If that rate dropped to 5.49% p.a., your repayments would be $2,292. That saves you $191 a month or $1,302 a year.
Unloan offers a competitive live-in with up to 80% LVR variable interest rate of 5.49% p.a. (comparison rate 5.40% p.a.^). But Unloan also offers a loyalty discount. Every year you have stay with Unloan, you automatically get a 0.01% p.a. discount on your rate. This happens every year of your loan, up to 30 years.
2. Pay off your home loan sooner
Refinancing to a lower rate saves you money. But it also lets you pay your home loan off faster.
Paying a loan off faster means you could save even more in interest charges. And you could get out of debt faster, which frees up more of your income for saving, investing – or spending.
One way you can repay your loan faster when refinancing is to switch to a loan with a lower rate but keep paying the same amount as you did before. This is effectively making extra repayments on your loan.
But you're still just repaying the same amount as you were before.
Unloan's home loans come with a redraw facility. This is a handy feature if you've been making extra loan repayments and suddenly need to access some of the money. A redraw facility lets you take out some of that extra money you've paid into the loan and spend it however you want. Maintaining an available redraw balance can help reduce interest on your home loan.
3. Unlock your home equity
As you repay your loan each month, you slowly own more of your house as your debt shrinks. This is called equity.
Equity also increases as property values rise. Let's say you own an $800,000 house that you bought with an $80,000 deposit. At the start, you had just $80,000 equity. The rest is the loan principal.
Years pass and you've repaid a further $100,000 off your loan principal. And the property is now worth $850,000 on the market.
This means you've gone from having just $80,000 in equity to $230,000 thanks to rising prices and your diligent loan repayments.
Refinancing is also a great opportunity to unlock some of this equity. You can get a new home loan and slightly increase your loan amount to pull out some of that equity. Then you can use that money to fund a home renovation, invest, or whatever you like.
Watch the Unloan Refinance Classic
Learn more about refinancing with Unloan
Sponsored by Unloan. With Unloan, you can get a home loan that rewards you every year. A rate that gets better, with no negotiations needed. Every year you're with Unloan, you'll receive an automatic discount of 0.01% p.a., for up to 30 years.
^ Comparison rate is calculated on a $150,000 secured loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Image: @andresr via Canva.com