Refinancing your home loan: What you need to know?
Refinancing your home loan is the process of taking out a new loan to replace your existing loan. This can be done with your current lender or with a new lender.
There are a number of reasons why you might want to refinance your home loan, including:
To get a lower interest rate
To change your loan term
To access additional features, such as an offset account or a redraw facility
To consolidate your debts
To release equity
Benefits of refinancing
There are a number of potential benefits to refinancing your home loan, including:
Lower interest rate: If you can refinance to a lower interest rate, you could save thousands of dollars over the life of your loan.
More flexible loan terms: You may be able to refinance to a loan term that better suits your needs. For example, you may want to refinance to a shorter loan term to reduce your overall interest costs, or to a longer loan term to reduce your monthly repayments.
Access to additional features: Some lenders offer additional features with their home loans, such as offset accounts and redraw facilities. If you don't have these features on your current loan, you may be able to access them by refinancing.
Consolidate your debts: If you have multiple debts, such as credit card debt and personal loans, you may be able to consolidate these debts into a single home loan. This can make it easier to manage your repayments and save money on interest.
Release equity: If you have equity in your home, you may be able to release this equity by refinancing. This can be used for a variety of purposes, such as renovating your home, investing in property, or starting a business.
Costs of refinancing
There are also some potential costs associated with refinancing your home loan, including:
Using an experienced Mortgage Professional can simplify the process as they guide you through the transaction and explain any fees or charges before you sign for a loan. Some of the fees are outlined below:
Lenders are NO longer allowed to charge Exit fees - Lenders are NOT allowed to charge exit fees on loans taken out after 30 June 2011. If you did get your loan before 1 July 2011 your lender will be able to tell you if exit fees still apply on your loan. However, if you are on a fixed rate loan, be aware you may need to pay a break fee.
Establishment Fees - An Establishment fee may also be known as ‘application’, ‘up-front’, ‘start-up’ or ‘set-up’ fee. This fee is a one-off payment when you start your loan.
Lenders Mortgage Insurance (LMI) - Lenders mortgage insurance is an insurance that Lenders take out to protect themselves from borrowers not being able to repay their loan. It only applies if there is less than 20% equity in a home. If you paid LMI on your existing loan, before refinancing you will need to ensure that there is more than 20% equity in your property to avoid paying LMI again.
Ongoing fees - These are sometimes also known as administration fees. They may be a monthly charge or may be a fee that applies to a specific service. Not all Lenders charge ongoing fees.
Whether or not refinancing is right for you depends on your individual circumstances. It is important to weigh up the potential benefits and costs before making a decision.
Tips for refinancing your home loan
Here are a few tips for refinancing your home loan:
Shop around and compare offers from different lenders. This will help you to get the best possible interest rate and features.
Be aware of the costs associated with refinancing. These costs can include application fees, discharge fees, valuation fees, and break costs.
Read the fine print carefully before signing any loan documents. This will help you to understand the terms and conditions of your new loan.
Refinancing your home loan can be a great way to save money and improve your financial situation. However, it is important to do your research and weigh up the potential benefits and costs before making a decision.
We can work with you to find out your requirements for a loan and will then present you with a comparison sheet of at least three Lenders that meet your needs. This comparison sheet is set out to allow you to easily compare loan features, fees, interest rates, comparison rates and other important information. We will also explain to you the advantages and disadvantages of refinancing so you are able to make an educated decision on what is right for you.
This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.