Is It Time To Consider Refinancing?

With all of the changes in the market is it time to start looking at your loan structure? Should you start thinking about fixing a portion, or all of your loan? Can you lower the amount you are paying by consolidating your debt?

These are all very tricky questions, and the best place to start is to look at your existing debt load and how much room you have to move. Do you have a buffer zone around what you earn, as compared to what you spend? This is an important factor in not over-extending yourself on your loan(s).

Then you need to decide what you are comfortable with, no one can predict exactly what the market will do in the coming months, however the main opinions tend to be that interest rates will probably continue to rise, to a degree. What happens after that is debatable, some say rates will go down again by the end of 2004, and some say they will take longer.

You may want to have a look at what you are comfortable with, if you want to maintain the flexibility of extra repayments, or redraw of earlier extra payments then you may want to look at fixing a portion of your loan. For example you can fix 50% of your loan so you know what your repayments for that portion of the loan will be for a set amount of time, and leave the remainder in a variable rate for the flexibility.

If you feel that you need of a more conservative approach then you may want to fix the whole loan amount, this way you know the repayments for the length the loan is fixed. You can only make limited extra repayments during this time, and paying out the loan before the end of the fixed rate period will incur additional break fees, so it is best to look at your longer term plans to make sure you are not going to want to refinance or pay out the loan before the end of the fixed term.

You may also want to sit down with your financial planner to discuss your overall financial strategy to see how the increased rates may influence your strategies.

If you would like to discuss restructuring or consolidating your loan please feel free to contact Elisa on 02 9939 8823.