Refinancing Mortgage Loans
Why refinance?
People may look at refinancing their mortgage for a number of reasons including:
To save money by reducing interest rates & fees
If more attractive interest rates are available then it may be worth refinancing to take advantage of lower interest rates.
To reduce repayment amount on mortgage
At times, people may also look to refinance their loan to reduce the size of the monthly repayment by re-amortising the loan over the original period or by moving to a lower interest rate.
Consolidating debt
Personal loans, car loans, credit card debt etc. are generally much higher interest rates than a home loan and benefits may be found by merging this under the lower interest rate of the home loan, making all repayments into the home loan account.
To release existing equity
If you have existing equity (the difference between valuation and outstanding loan balance) you may be able to access that equity as cash through refinancing.
To restructure the loan
Mortgage loans can be structured in many ways ie. variable, fixed, split etc. as times change their may be reason for switching structures.
Unhappy with current provider
For various reasons people may become dissatisified with their current lender and seek to switch to a new bank or lender.
If more attractive interest rates are available then it may be worth refinancing to take advantage of lower interest rates.
To reduce repayment amount on mortgage
At times, people may also look to refinance their loan to reduce the size of the monthly repayment by re-amortising the loan over the original period or by moving to a lower interest rate.
Consolidating debt
Personal loans, car loans, credit card debt etc. are generally much higher interest rates than a home loan and benefits may be found by merging this under the lower interest rate of the home loan, making all repayments into the home loan account.
To release existing equity
If you have existing equity (the difference between valuation and outstanding loan balance) you may be able to access that equity as cash through refinancing.
To restructure the loan
Mortgage loans can be structured in many ways ie. variable, fixed, split etc. as times change their may be reason for switching structures.
Unhappy with current provider
For various reasons people may become dissatisified with their current lender and seek to switch to a new bank or lender.
When to Refinance your Mortgage?
Everybody's situation is different and it's all about chasing the best deal, structure and services that suits you and 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 of moving or staying.
One of the first things to look at is 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?
Also, to compare against a new service, know exactly what you have now.
The Comparison Rate is useful guide for comparing home loans. The Comparison Rate provides a single percentage figure that takes into account things such as fees and charges which make up the cost of credit, in addition to the interest charge. So, it helps to compare 'apples against apples' so to speak.
Also be aware of any application fees, stamp duty, government charges or registration fees which may or may not apply with a new loan.
How to Refinance?
The process is some what similar to when you fist took out your loan in that the lender you are applying with will normally require the same documents (income statements, current assets, bank statements, current debts etc.), probably perform a credit check and require 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 offer their experience to review 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
Getting a free holiday for changing lenders sounds attractive although in reality getting the right solution for your needs should be first on the list. Incentives and inducements are short lived gains, long term savings and flexability would be a much more attractive proposition.