Answering Your Questions About Home Loan Refinance
Should I Refinance? This is the most commonly asked question I receive during my appointments.
Am I missing out on anything by staying with my current lender? How does refinancing work?
I am going to run through these questions and help you decide if refinancing is something to consider or if your existing home loan is competitive and provides all the requirements you expect from your home loan.
What is refinancing exactly?
When you refinance, you’re replacing an existing home loan with a new one. This can be with the same lender, but most of the time is switching to another lender to benefit from a more competitive interest rate or particular products and facilities that the existing lender cannot offer. There are numerous reasons why we refinance a home loan, and this can include freeing up funds for a renovation, purchasing another investment, or to take advantage of a better interest rate.
Is refinancing the best option for you?
If you haven’t reassessed your existing home loan in the last four years, then it’s time to contact your mortgage broker and confirm that your current home loan product is still competitive. Given the amount of competition and available home loan products on the market, it is more than likely there will be a more competitive option to save you thousands of dollars.
Are you looking to access the equity in your property to purchase an investment property or complete renovations around your existing home?
A common reason people refinance their home loans is to access the equity to complete home improvements or buy an investment property. If your current home value has increased and equity has built up, you may be able to access this equity in the form of cash to fulfil these options. Rather than spending your savings, this is a good approach as it allows you to provide a deposit for your next purchase. If the funds are used for an investment purchase, they will also be eligible for tax deductibility.
Do you want a more competitive interest rate?
Good mortgage brokers stay up to date with interest rates, incentives and products offered by lenders. The everchanging home loan market is very competitive, and lenders are always creating new ways to win your business.
Most of the time, people consider refinancing to save on the monthly interest they are paying with their current lender. Even a minimal difference in your interest rate could save you thousands of dollars during the life of your loan, ultimately helping you pay off your home loan faster.
While this is in the best interest of anyone with a home loan, there are so many lenders providing so many products that it can take hours of your time researching these trends and can become very confusing. Not all home loan products are the same, and home loans that offer lower interest rates often lack the benefits of higher-rate products, and may not have all the features of your existing mortgage.
Sometimes, getting a lower interest rate can be done without the hassle of refinancing. In many cases, we have been able to negotiate better deals with our clients’ existing lenders just by asking!
Have your personal circumstances changed?
You may want to refinance if you have experienced a significant life change. An example of this is a change in employment resulting in a lower income, or a change in marital status. Taking out a new home loan may enable you to consolidate your personal loans and credit cards into one facility, providing you with lower monthly repayments and savings in interest.
Do you want to change your loan type?
Switching your home loan from variable to a fixed may allow you to improve your interest rate without changing lenders. Maybe you want to split your loan providing part variable and part fixed rates. In either case, you may need to refinance depending on the type of home loan you have. We can assist you to decide which loan structure is the best for your requirements.
Over the past month or so, there have been a few banks who have increased their standard variable interest rates. These lenders are not majors, but given there have been these few, may indicate that a rate hike is on its way across the board and more reason to consider fixing your loan to enable you to reduce your monthly repayments.
So, you have decided to Refinance? What’s next?
Once you’ve decided to refinance, the process is relatively simple as long as you have the right assistance.
Without the knowledge, refinancing can be very confusing and challenging. We can help you submit your application, which will involve providing ID, proof of income, completing application forms and following up outstanding documents. Lenders will often require you to get a valuation of your property to determine how much you can borrow, which generally requires a property inspection by a licensed valuer.
Once the lender is satisfied, you’ll receive approval with a copy of the loan contract to review, sign and return. When you’ve done that, your new home loan will be drawn down, and money will become available.
Get in touch if we can help.
Your decision to refinance or not will come down to your circumstances and financial situation. We will help you choose the best loan solution for your needs.
For prompt and expert assistance, please register your interest at PropertyInvestingFinance.com, or for more urgent help, you can give us a call on 1300 992 260.