If you are a homeowner who has additional personal debt, refinancing your home can be a good option to consolidate your debts and reduce your monthly repayments. There are however, numerous considerations to think about before accessing your homes equity to pay down other debts. Think through the following:
- Is there a short and long term financial benefit to you
- Are you saving on overall interest repayments
- Are you fully aware of all costs and fees
- Does debt consolidation through refinancing help you achieve complete control of your debts
If you believe you can achieve the above points, below are some tips provided by Simple Living Australia
on how to go about the process of lowering your interest rate whilst consolidating your debt.
Start by Comparison Shopping
Most financially savvy peoples do their own due diligence before any type of major purchase and this generally encompasses comparison shopping and then negotiating. Getting multiple quotes is necessary in finding the best deal. If you are looking for the best mortgage rate, the same is true.
Two very popular methods of comparison shopping include comparison websites and brokers. A combination of both will really provide you with a strong view of what is available and is best for you.
Locating the best rates are one thing, qualifying is another. One of the first ways to ensure you are prepared for negotiating a better mortgage interest rate is positioning your finances in a way to be attractive to lenders. This process of financial positioning, even when you are in debt can make a huge difference over the long term. The first aspect of strengthening your financial position is through improving your credit score. Your credit score is a primary signal to lenders in establishing your risk level. This can have a serious impact on the rate you qualify for.
Review your score and if it’s lower than expected, check for errors which can be removed and immediately improve your score.
Other factors to assist with getting a lower rate
A few other important items to help improve the quality of your application for a low rate loan include:
LVR – Unfortunately if you are in debt this might be a factor that you don’t have much control of. Depending on how much equity and debt you have, this number will be higher or lower.
Employment – If you are self-employed having 2 to 3 years of tax returns will help strengthen your trustworthiness in terms of steady income. The longer you have been employed with the same employer the better as it establishes stability in terms of income and the ability to service a loan.
Credit, LVR and employment are 3 key factors that lenders look at when determining rate and loan amount. When looking to refinance to consolidate personal debt, make sure that you review and cover off these areas to ensure you get the best rate.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan