When is the best time to
refinance your home loan?
As a homeowner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender, who can better meet your current needs, wants and circumstances.
Refinancing can also allow you to consolidate your debts or pay down your mortgage more quickly.
Another common reason borrowers look to refinance is so that they can access equity – the amount you’d get from selling your home after settling any associated loans and any other costs associated with the property. Depending on that amount, you may be able to access equity in the property without having to sell it.
However, refinancing is not suited to everyone. There are many different factors you will need to consider when thinking about refinancing a loan. Before you initiate an application to refinance, your broker will need to assess your needs and objectives as well as your current financial situation.
So how will you know that refinancing is the right option for you?
The first step is to speak to a professional, such as a mortgage broker, about your needs and whether you can afford a different loan structure or other change to your mortgage, particularly if you have more than one property.
Are you looking to pay less interest?
Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, this could potentially save you a lot of money in the long term.
While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.
At this point, the broker will need to find out about your existing loan, repayments and current loan structure.
Your mortgage broker will also need to find out more about your current financial situation, including your income, any other current debts and about any assets you own.
The current value of the property is also taken into consideration, so your broker will have access to current data that will indicate what your property is likely to be worth.
The broker will then review the various loan options and figure out whether it’s worth it for you to refinance. Sometimes it’s not worth it if it’s only going to save a couple of hundred dollars a year, particularly when you take into consideration the exit and application fees involved. However, if it’s going to save upward of $1,000 a year, refinancing might be a sensible approach.
In some cases, the mortgage broker can tell you if getting a lower interest rate from your current lender can be achieved without refinancing.
Do you want to change your loan type?
One of the risks of refinancing your home loan is that you may need to pay Lender’s Mortgage Insurance (LMI) to your new lender. If switching your loan means you will need to pay LMI again, it may not be worth refinancing.
If you do decide to go down the refinancing path, working with a broker rather than going straight to a lender has advantages. Brokers generally have access to loan options from a range of different lenders and if there’s a better opportunity for you, they’re usually able to access it.
It is important to consider that when you take up a new home loan, it can incur exit fees and may not have all the features your existing home loan has.
Have your circumstances changed?
If you had a recent major life change, such as a loss of income, you might be looking to refinance.
If you want to refinance to lower lending costs to help you manage your monthly repayments, speak to your mortgage broker who can negotiate with your current lender for a rate suitable to your current situation.
Your broker can also help you look at alternate options to consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments, or help you keep your repayments on time, and even save you interest in the long term. The key is to speak to a Mortgage and Finance Association of Australia (MFAA) accredited mortgage broker such as Reliiance Financial Solutions who usually has access to many lenders and their products and has the expertise to help you through the refinance application process.
FAQs
Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.
LMI is a third-party insurance premium payable by you as the borrower, to protect the lender against the potential loss of money if the borrower is unable to repay the home loan. Generally, an application with a Loan-to-Value Ratio (LVR) of 80% or more may result in the borrower having to pay Lender’s Mortgage Insurance.
Extra payment is an excellent feature of a good mortgage deal. Here, your lender lets you make lump-sum additional payments along with your regular monthly payment. Making extra payments allows you to shorten the length of time you are paying your mortgage. Since your balance is being paid off faster, you will also have fewer total payments to make, thus lowering your interest. At Reliiance Financial Solutions, we can help you find the most suitable mortgage deal for you. We have a range of lenders that allow you to make as many extra repayments as you want, whenever you want, without attracting any penalties.
Stamp Duty is a government tax imposed on contracts, with the amount usually calculated as a percentage of the contract value. In layman’s terms, it is the tax charged for your legal documents to be ‘stamped’.
If you are planning to buy a property, it’s crucial to factor your State’s Stamp Duty into your budget.Chances are, based on your circumstances and state of domicile, you might be able to obtain a stamp duty exemption, or concessions (discount) against the purchase of your first home. Stamp duty laws get changed often, so be sure to check your State Government’s website for the most up-to-date information.
Did you know that some lenders would allow you to cash out any extra repayment you made whenever you need the money? You read that right. This useful mortgage feature is called “redraw facility”. You can withdraw any extra repayments or lump sum payments you make over the life of the loan. At Reliiance Financial Solutions, we will explain all mortgage products to you, including those which allow you to the redraw option.
Testimonials
Discover how we’ve helped our clients navigate their financial journeys with personalized solutions. Read their stories of success and empowerment below.
A 5-STAR RATED FINANCIAL SOLUTIONS PROVIDER BY OUR CLIENTS
At Reliiance Financial Solutions, we have been privileged to have worked with hundreds of remarkable individuals and families.
Very few things come close to receiving their genuine appreciation of our services. All we can say in return is – the pleasure was all ours.
It is also our pleasure to share some client testimonials with you. Please click on Video Testimonials to view them all. Use the buttons at the bottom of the screen to navigate through the videos.
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