There are a variety of specific situations where refinancing or transferring a bond can be beneficial. For many homeowners, though, this will come as a complete surprise. We’ll bet easy money that many of you had no idea that you had any options when it comes to managing your bond beyond simply meeting your monthly repayments.  

In this article, let’s explore the circumstances that would bring you to either refinance or transfer your bond, as well as the key considerations that you should factor in before you make a decision.  

The goal is to make sure that you have all the information you need in order to make an informed decision that best serves you financially. 

The Difference Between Refinancing Or Transferring 

In simple terms, transferring a bond involves moving your loan from one bank to another, while refinancing refers to renegotiating the terms of your existing bond with your current lender. Naturally, this is a short definition, so if you would like to find out more about the pros and cons of each and why you should go one or the other, then please click here. 

When A Change Makes Sense 

For some, a bond is simply something you pay off over several years and that’s all there is to it. But in reality, there may be a time when as a homeowner, refinancing or transferring your bond makes the most sense for your financial situation.  

For instance, when you initially secured your home loan you may have agreed to extraordinarily high interest rates. However, if market interest rates have dropped, refinancing can reduce your monthly payments and total interest paid over the loan term. Alternatively, you may have heard that another financial institution is offering more competitive rates than your current lender, so transferring your bond could result in long-term savings. 

Whatever your reason, it’s important that you do your research. You want to make sure that the savings outweigh the costs, which include bond registration fees, early settlement fees, or transfer costs, as well as legal and administrative costs involved. Added to that, you should also consider the impact that these actions can have on your credit score.  

Clearly, it’s imperative that you assess your financial situation and long-term goals carefully before making any changes to your bond. 

6 Reasons To Refinance or Transfer Your Bond 

1. Accessing Home Equity 

Let’s say that your property has appreciated in value. If you decide to refinance your bond, you can access this equity for renovations, paying off debt, or other large expenses through a cash-out refinance. Alternatively, you may find that there are banks offering higher loan-to-value (LTV) ratios, making it easier to access your equity with another lender. 

2. Switching From Fixed To Variable 

You may want to switch from a fixed to a variable interest rate – or vice versa. For instance, if you expect interest rates to remain low, then switching to a variable rate could lower your payments. However, if rates are rising, then refinancing to a fixed-rate bond could protect you from future increases. 

On the other hand, the time to consider transferring is if your current bank isn’t offering favourable rate structures and you want to transfer to one that meets your financial goals. 

3. Debt Consolidation 

If you are needing a more aggressive strategy to dealing with your debt, and another bank offers better debt consolidation terms, then you could transfer your bond. You could also go the refinance route, in which case, combining higher-interest debts (like your credit card) into your home loan can result in lower overall interest. 

4. Shortening Or Extending Terms 

Taking out a bond for the next 30 years might work under some circumstances, but there may come a time when you want to reduce the bond terms. Similarly, you may have thought you could tackle your bond in 10 years, but you can’t keep up with the higher payments. In either case, refinancing your bond could allow you to shorten or extend terms. You could also skip the refinance route and opt to transfer your bond to a bank that offers more flexible terms might make the change more advantageous. 

5. Financial Stress 

Whether you’ve lost your job, or life has thrown too many unexpected expenses your way, it’s possible that your bond repayments could become too stressful to manage. In this case, a transfer could be beneficial if your new leader offers better repayment terms or lower fees. It also might be possible to refinance your bond in order to extend the terms and reduce monthly payments so you can ease your cash flow. 

6. Special Offers or Rebates 

There may be a time when you see that one (or more) of the banks is offering rebates or discounts on bond transfer fees, which reduces the cost of moving your loan. In this case, it would make sense to transfer your bond and enjoy the savings. 

Feeling Informed? 

There are indeed very good reasons to refinance or transfer your bond, all of which are intended to provide some financial assistance. That said, don’t forget to consider the costs and administration associated with transferring or refinancing your bond so that you can make absolutely sure that this is the right move for you. 

Don’t forget that AA Inform offers a variety of property tools and resources, including our home affordability calculator and free property valuation reports. Tools like these can help you to assess your home’s worth accurately and get true insights into properties of interest to you.