Refinancing Your Home Loan

If you are considering refinancing your mortgage, or want to know how to refinance your loan, here is an introduction to help you out.

 

Why Refinance?

You might look at refinancing your mortgage for a number of reasons including:

Saving money by reducing interest rates and fees – If lower interest rates are available then it may be worth refinancing to save interest costs.

Reducing repayment amounts on a mortgage – You may want to refinance your loan to reduce the size of the monthly repayment. This is possible by re-amortising the loan over the original period.

Consolidating debt – Personal loans, car loans and credit card debts generally have much higher interest rates than a home loan. You may be able to save on interest payments by merging all your debts under the lower interest rate of the home loan and making all repayments into the home loan account.

Releasing existing equity – If you have existing equity (that is, the value of your property is higher than the loan balance) you may be able to access that equity as cash through refinancing.

Restructuring the loan – Since mortgage loans can be structured in many ways, such as with variable, fixed or split rates, then as times change you may have a good reason for switching structures.

Changing to a new provider – You may become dissatisfied with your current lender and seek to switch to a new bank or lending institution.

 

Everybody’s situation is different and it’s all about chasing the best deal, structure and services that suit your needs. Refinancing is a process that requires a lot of attention, so make sure you have the time available to work through and understand possible benefits and disadvantages before you remortgage or refinance your home.

First up, you should look at your existing loan conditions. For example: Are there any early termination or payout fees? Are there any penalties for paying out an existing loan with another? It is also important to understand your current loan conditions so you can compare them against a new service.

The Comparison Rate is a useful tool for comparing home loans. The Comparison Rate provides a single percentage figure that takes into account all fees and charges which make up the cost of credit, in addition to the interest charges. Basically, it helps you compare “apples with apples”.

You also need to be aware of any application fees, stamp duty, government charges or registration fees which may apply to a home loan refinance.

 

How to Refinance

The refinancing process is similar to when you first took out your loan. The new lender will normally require the same documents (income statements, current assets, bank statements, current debts, and so on), and will probably perform a credit check and ask for a property valuation.

If you have an all-in-one or transactional account you’ll also need to remember to set up any direct debits and credits with your new bank.

 

Who to See About Refinancing a Mortgage

Good financial advice is always a wise choice. Professional financial advisors can use their experience to find a solution to suit your situation, requirements and goals. Mortgage brokers can also help by providing comparisons of a range of lender products. Your existing lender may also be able to offer new services or structures to suit your current needs.

 

Inducements

Beware of inducements like getting a free holiday for changing lenders – it sounds attractive, but in reality getting the right solution for your needs should be first on the list. Incentives and inducements are usually short-lived gains, but long-term savings and flexibility are a much more attractive proposition.

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