A Simple Guide: Home Loan Refinancing

A Simple Guide: Home Loan Refinancing

 

Home loans are one of the biggest financial commitments most Aussies ever make. As life changes however, so do our needs. That’s why it makes sense to check in on your home loan and ensure it’s still working for you.

If you think it might be time for a change, there is an opportunity to improve your financial situation by switching products or lenders, you might want to think about refinancing.

Why do you want to refinance?

Why do you want to refinance?

How do I refinance my home loan?

How do I refinance my home loan?

Refinancing your home loan is the process of getting a new loan to replace an existing mortgage – this could be with the same lender through moving to a new product, or switching to a new mortgage with a different lender. While some may refinance their home loan to take advantage of a lower interest rate, others do so to consolidate their debts. Refinancing could also help you access any equity built up in a property.

Keen to learn more? Read 'How to Refinance your Home Loan?’

What are the benefits of refinancing?

Depending on your financial goals, there are potential benefits that can make refinancing seem like an enticing option. However, before you go and refinance to save a few basis points off of your existing interest rate, ensure you understand your current loan including the comparison rate, loan features e.g. redraw, any break costs etc. as well as your financial situation in full to decide if refinancing is right for you.

Refinancing to release equity

Refinancing to release equity

Refinancing could be used to release equity that might have been built up in your property. Depending on your overall financial situation, this could potentially be used to finance an investment property, or even finance some overdue home renovations.

Keen to learn more? Read our article: What could Refinancing do for me?

Refinancing to consolidate debts

Refinancing to consolidate debts

Refinancing your mortgage could also be used to consolidate any other debts you might have  (such as a car loan or credit card balance) into a single loan. This could help you save on multiple loan admin fees, and will mean you’ve only got to keep track of one repayment.

Keen to learn more? Read ’Consolidating Debt: The Big 4 Benefits of Refinancing’

Can you still refinance if your mortgage is in arrears?

While it's possible to refinance your mortgage, even when in arrears, it's highly dependent on your individual circumstances and isn’t always an easy task. It would be wise to speak to a broker or lending specialist to find a way forward.

Keen to learn more? Read Refinancing Your Mortgage in Arrears

What fees are involved with refinancing?

What fees are involved with refinancing?

There may be costs involved with refinancing and switching lenders or products. Ranging from loan application fees with your new lender, to a discharge fee with your outgoing lender, an even property valuation and risk fees - refinancing isn’t as straightforward as changing your direct debit details.

Make sure you read the terms of your current loans carefully (including break fees, interest rates, comparison rates etc.) and weigh these up against the features of any refinance options you’re considering, including the loan term.

Keen to learn more? Read our article: Refinancing your loan? What fees to expect

Do you need to pay LMI again when refinancing?

It’s possible that some people may have to pay a risk fee that their chosen lender requests, to offset the risk or otherwise protect the lender. For example, a Lenders Mortgage Insurance (LMI) fee will most likely be required where the amount you borrow is above 80% of the property’s value.

Before thinking about refinancing, fully consider your financial goals and understand your current situation.

Try our Home Loan Repayment Calculator

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Important Information

This repayment calculator gives you an estimate of what your home loan repayments could be, based on information you have provided in the calculator. The calculator does not take into account loan establishment or application fees, nor government statutory or lender fees.  It is to be used as a guide only and does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it.

 

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