Steps to Refinance your Home Loan
Refinancing a home loan can be a great way to save money on your mortgage. It’s crucial to find the right refinancing option for your needs and understand any costs associated with it. We have written this guide to the key considerations when refinancing your home loan.
What is refinancing a home loan?
Refinancing is changing your loan from one lender to another to secure a loan option that suits your needs. As part of switching to a new lender, your new lender settles your mortgage debt with your current lender.
You may have several reasons to consider refinancing, such as the end of a fixed-rate period, wanting to save money or a change in your circumstances.
Like a new loan, different types of loans are available depending on your lender and needs, such as fixed-rate, variable or interest-only loans.
Although you can refinance at any point, we recommend you chat with us to understand your options and any costs associated with refinancing. It is important to ensure that you understand the total cost of changing and find the most suitable options for your circumstances. No one wants to find they are liable for additional fees in the fine print!
Similarly, suppose you have an equity of less than 20% (80% Loan to Value Ratio) when you refinance. In that case, there is a possibility that you will have to take a Lender’s Mortgage Insurance, which may mean it is more expensive to change then your current rate, and there will likely be fewer options available. In certain circumstances, refinancing may not be a suitable option.
However, refinancing has many benefits if it is the most suitable option for you.
What are the benefits of refinancing a home loan?
The different types of refinancing can have various benefits. You may consider refinancing if:
- The prospective lender offers a more competitive interest rate than your current lender
- You wish to switch to a fixed or variable rate of interest (depending if rates are going up or down)
- You want to reduce the term of your mortgage loan and increase repayments.
- You would like more favourable loan features for your circumstances
- You wish to use your equity to access additional funds to purchase an investment of to undertake renovations
How to refinance a home loan
We recommend you start by determining what you are trying to accomplish with your refinance. Once you have clarity around what you want from a new loan solution, there are some typical stages of mortgage refinancing:
Research
As your Mortgage Broker, we do this part for you! We will work with you to assess your current interest rates and repayment amounts. We have access to hundreds of loan options and can negotiate a solution that suits your personal and financial goals.
Property Valuation
You will likely have your property valued by the bank, especially if it has been over 12 months since your last valuation, so they can confirm how much you have in equity
Application Process and Credit Check
If you decide refinancing is a suitable solution for you, the next step is to start the application process and credit check. It is important to understand that pay later, credit cards and car loans can all impact the borrowing capacity and subsequent repayment ability you’re your application is assessed.
Conclusion
Refinancing a home loan has the potential to improve your overall financial situation. However, it is important to have a clear understanding of your new loan obligations and any fees when you leave your current lender. Changing your loan is a significant financial decision, and it is important to have clarity about your new financial position before making any decisions.
By looking at all of the different refinancing options available, we can help you find competitive options tailored to your needs and budget.
Disclaimer:
Terms are subject to approved persons only. This information is true and correct as of 17/09/2022. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.
