What could Refinancing do for me?

What could Refinancing do for me?

You don’t need to move home to switch your home loan. But there are a few things to think about before refinancing your home loan with another lender. Here are some scenarios where refinancing may be a good idea.

 

Refinancing a home loan could be an option to consider for those who want to...

Save money
Save money

Refinancing could get you a lower interest rate. This may reduce monthly repayments, which could allow for the loan to be paid off sooner.

Consolidate debts
Consolidate debts

Consolidating outstanding personal loans, credit cards or other loans could be a good way to save on interest, as having to pay multiple (often higher) interest rates can really add up. It could also reduce the number of monthly repayments, which can make making repayments on time easier to manage.

Use the equity in property
Use the equity in property

This could be used to help you do things like buy an investment property, or even pay for renovations. Find out more about using the equity in your home.

Pay for home renovations

Pay for home renovations 

Dreaming of that new kitchen, overhauled bathroom or a next-level extension? Refinancing can be a way to access your equity to help pay for your property renovations. This could let you utilise a lower interest rate (compared to a personal loan) that’s attached to your home loan. You’ll also continue to just make the one loan repayment. It’s important to create a renovation budget before booking the tradies in

Access loan features to better meet your needs
Access loan features to better meet your needs

An offset sub-account or a variant of this (the name and offering may differ between lenders) might help if you have any funds accumulated, as these can be placed in this account to help  reduce the daily interest calculated on an outstanding loan balance. Different lenders and loan products may also offer different repayment options,  or things like a direct line of contact for more support and customer service.

Lock in a fixed interest rate

Tips for home loan refinancing

Consider your up-front charges

There are usually fees associated with refinancing, as well as (in some cases) home loan break costs to pay out an old mortgage early.

  • Loan application (or establishment) fee – a one-off cost to set up the new home loan
  • Valuation fee – to cover a professional property valuation
  • Title protection fee – covers the lender for property fraud and other risks during the title transfer period
  • Settlement fee – covers administrative costs involved with settling the loan
  • Discharge, break, or exit fees – previous lender may charge this. Make sure you read the loan contract you signed with your previous lender so you’re across any such fees you might have to pay
  • Government fees – such as stamp duty or mortgage registration fees
  • Monthly loan fees or annual package fees for the new loan
  • Risk Fees to protect the lender, such as Lender’s Mortgage Insurance.
 
Check if any risk fees will apply

These types of fees usually apply where the amount borrowed is greater than 80% of the property value.

 
Consider the impact on your credit score

Lots of things can impact your credit score, including when a credit provider obtains a copy of your report during your credit application. Whilst each of the Australian credit reporting bodies calculate credit scores differently, making multiple applications within a short space of time can negatively affect your credit score. Find out more about credit reporting here.

 
Make sure you're borrowing within your means

Seeing an enticing offer can make you want to borrow more than you need “just in case”, but don’t forget that variable interest rates fluctuate, and fixed interest rates have an end date – and you need to be able to afford repayments comfortably should anything happen.

 

Keen to know more? Your home loan is likely to be one of the biggest financial commitments you’ll make. Read our Ultimate Guide to Refinancing and decide if your home loan still works for you. 

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