Why re-finance your home loan?
Make your money go further
Re-financing your home loan, is it right for you?
Wanting a lower interest rate, consolidating other debts into one easy to manage repayment and accessing your equity are just some of the reasons why you may choose refinance.
The decision to refinance you home loan is made when you realise your current home loan is no longer suited to your financial situation.
Before going ahead with the decision, make sure you’ve done your homework and sought professional advice to see if it’s the right choice for you.
Why consider re-financing and consolidating debts
Your life never stands still, and neither should your mortgage.
Your home loan might have been right for you when you took out your mortgage, but as your life changes, so do your lending requirements and it might be time to search for a more suitable product.
You may be able to refinance and find a loan that’s more appropriate for your needs, with more suitable features and a competitive interest rate to match.
Are your finances stressing you out and causing you to...
Switching lenders for a better home loan deal.
Imagine if you could eliminate your financial stress and...
The good news is, it’s all possible — even if you’re overwhelmed by debt right now. Refinancing and consolidating your debts could improve your cash flow and financial security. Lets get in touch!
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5 reason to refinancing and /or consolidating your debts?
Pay off your mortgage faster!
If you’re striving to be mortgage-free, there’s a good chance there may be a more appropriate home loan product to meet your needs.
Some mortgage products are designed to motivate borrowers to repay their mortgages quickly.
So now is the perfect time to talk to your mortgage broker and consider whether a new home loan will see you on the road to financial freedom – fast!
Consolidate your debts
When refinancing your home loan, this is an opportune time consolidate your other debts, such as credit cards or personal loans, into your home loan. This could save you thousands of dollars in interest charges. Rolling your debts into one monthly or fortnightly repayment can also help make juggling your finances a little easier while improving your cash flow.
Better interest rates and lower repayments
Interest rates and mortgage deals are constantly on the move. To make the most of a competitive mortgage market, you might want to evaluate the loan product you currently have.
For example, you may want a lower variable-rate or lock into a fixed-rate.
Before refinancing your home loan, you should approach you current lender to see it they offer you a better home loan deal first.
Avoid monthly fees and charges
Some lenders charge a monthly account keeping fee – further adding to your debt. Competition between lenders has increased and some now waive administration fees, so re-financing your home loan with another lender can be a smart move to help cut your mortgage costs.
Another benefit of re-financing your home loan is it gives you an opportunity to restructure you home loan for future purposes and to access your equity.
As long as you are capable of meeting your home loan repayments, refinancing your mortgage can help you tap into the equity that you’ve built up.
Frequently asked questions
Refinancing is when you change your current home loan to a new home loan that satisfies your current financial situation. Refinancing can be done as a internal refinance (stay with the same lender) or externally (refinance your home loan to a new lender).
The most common reason to consider refinancing your home loan is to obtain a better interest rate. However, make sure you account for all the fees involved to refinance. Depending on your reason to refinance you need to see if you are saving a enough on interest and fees to make the process a viable option. If your LVR (loan-to value-ratio) is over 80% then you could also be required pay Lenders Mortgage Insurance.
The costs to refinance could include:
- Discharge fee from the existing lender
- Lender establishment fees
- Mortgage Registration fee
- Mortgage registration fee
- Fixed rate break costs if you are breaking a fixed rate home loan
- Lenders mortgage Insurance of the loan is above 80% LVR
Give us a call 0401 388 153 and will review your situation to see if refinancing to the right option for you.
The benefit of consolidating other debts into your home loan are you could have lower monthly repayment and also save on interest costs. However, you need to be mindful that you are paying these debts over a longer time (up to 30 years). Even though your scheduled loan repayment may be lower, the secret is keep paying the higher loan repayment and pay off your home loan years earlier.
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You could request a shorter loan term, rather than starting a new 30 year loan term. Depending your personality regarding credit, if are tempted to just make the lenders minimum repayment and not be disciplined enough to keep paying the higher repayment, then selecting a shorter long term might be the best option for you.
Three questions to ask before you refinance?
Before you make the decision to refinance your home loan, there are a number of areas to consider. Here we cover off some questions you should ask before making the switch.
Will I be better off in the long run?
Refinancing your home loan to a lower interest rate can be a great way to lower monthly mortgage payments, freeing up some of your income for spending in other areas.
However, opting for lower repayments will usually mean signing up for a longer loan period and the longer you take to repay your home loan, the higher the accumulated interest payments will be.
Before refinancing, do some calculations to see how the new loan will stack up in the long run.
If you find your total interest payments are higher under the new loan term, you might want to consider adjusting the amount you pay each month (if the mortgage terms allow) to help you to become mortgage-free sooner.
What are the costs of switching lenders?
Switching to a new lender can come with a number of associated costs, so it is important to ask your mortgage broker about these before making any changes.
Some of the costs you need to be aware of include:
Bank fees. When you close your home loan account, you may be hit with a discharge fee (typically $100-$400) or break fees if you are ending a fixed rate loan before the end of the fixed term. Your new lender may charge fees for processing your new application, valuing your property and settlement.
Depending on the cost of each fee this could bring your total set up expenses to $300-$1000.
If you are staying with your current lender but moving to a new product, you may also be charged a variation fee for this.
Any lender fees accrued when refinancing will be added to your new loan, so to avoid paying interest on these over the life of your loan, you may want to consider paying off any costs when they are first charged.
Lenders Mortgage Insurance (LMI). For each new loan, a lender will look at the loan-to-value-ratio (LVR) to assess whether Lenders Mortgage Insurance is required. If you are borrowing more than 80% of the current value of the property, you will have to pay Lenders Mortgage Insurance again.
To avoid paying Lender Mortgage insurance, your mortgage broker may be able to arrange an upfront valuation of your property, so you will know whether you will be liable for Lenders Mortgage Insurance before proceeding with a refinance.
What are the loan features I will require?
Choosing a new home loan involves much more than finding the lowest interest rate. Home loans come with a range of features, which can provide flexibility and help you pay off your mortgage faster.
Depending on the lender and home loan type you choose, some of the features you might be able to access include an offset account, free redraw, unlimited extra repayments and direct salary crediting.
There are many things to consider before signing up for a new loan, so do your homework to ensure you are getting the best deal.
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James Sylvester commenced Mortgage Brokering in 2009 and launched the Mortgage Broker Brisbane business "Your Home Loan Consultant" in February 2012.
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