Is your home loan still right for you?
Refinancing is a chance to look at what’s out there and to check whether your current loan is still the right one for you. If it’s not, it may be time to refinance. In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. Refinancing could save you thousands and give you greater flexibility.
When Would I Refinance My Mortgage?
Here we look at some of the reasons people in Australia refinance their home loan and its benefit.
The most common reason for people to refinance their mortgage is to get a better loan with lower interest rate. A loan with a lower interest rate or less fees can be the simplest way to reduce your repayments. It means you can unlock a little more spending money, or better still, pay off more of your principal to pay the loan back sooner. But you need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.
Another reason to refinance your home loan is to consolidate your debts and only have one monthly repayment. If you have multiple debts from various sources (such as home loans, personal loans, credit card debt, or other high interest loans) and you’re having trouble paying these off, then it could make sense to roll these debts together with your home loan. The main advantage here is that your home loan rate is typically a lower rate. Some credit cards have rates as high as 20% or more, which is very high in comparison to home loan rate. The key is to make sure you don’t lower your repayments once you’ve consolidated. The same is true if you manage to get lower interest rates on your variable home loan. The savings this provides should be used to pay off the loan faster, so don’t be tempted to use this as spending cash.
Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.
Another most common reasons to refinance is to renovate. If you’ve owned your home for a while and its value has increased, you may be able to use this equity to fund your improvements. An added bonus is that if you renovate well, you could potentially also add more value to your property. If the extra funds for the renovation are put into an ‘offset account’ you may be able to avoid paying interest on the renovation funds until you start using them.
Over recent years in the property market, houses have appreciated at a significant rate. Refinancing your mortgage with a new property value might let you tap into that extra equity, which you can use for other purposes including to put a deposit for buying more properties.
Know the costs of refinancing
One of the main reasons to refinance is to improve your financial position, which can only be achieved if you consider what other costs are involved in ending one loan and moving to another. Only then you can weigh up the benefits of switching loans. The best way to do this is to speak to your mortgage consultant. Some of the fees and costs that some lenders may charge are discharge fee, break cost, early exit fee, application fee for new loan, valuation fee, settlement fee, registration fee, lender’s mortgage insurance.
Most lenders will only charge you some of these, not all. When talking through your situation with us, we can help you understand what it will cost to end your current loan and begin the new one.
How we can help you?
When it comes to refinancing, you need to know exactly what is out there in the market to choose an option that serves your purpose best.
That’s where we can help. We deal with more than 20 lenders and understand the current market and therefore can offer a wealth of information and expertise for you to draw on. Not only we help you find the right loan, we also aim to make the whole application and approval process much easier.
The first thing we will do is catch up and chat about your current loan and circumstances and find out what your needs and goals are and how they could be achieved with the refinancing. We can then re-evaluate your borrowing potential and give you an idea of your current costs and identify any potential savings from rates, fees or features. From here we can then help find the suitable loan for you.
There are literally hundreds of different loan products for you to choose from. It’s just a matter of helping you find the right one.
As your mortgage consultant, we will look for a loan that suits you and your circumstances. With access to multiple lenders and an array of different loan products, we stay up-to- date with the changes within the market and new products from the lenders as they come through.
Once we’ve identified a loan that works for you, we take care of the application process on your behalf.
Can we help you?
If you are looking for refinancing, please contact us to make an appointment for a free no obligation consultation. Contact us