To refinance or not?

July 01, 2014
Andrew Heath

Do you have a mortgage?


If so, you may have given some recent thought to refinancing, especially given the fact that all of Australia’s lenders are competing aggressively on rate and offering sharply priced home loans.


But while there is no denying that Australia’s lenders are offering some very competitive home loan packages and interest rates at the moment, what are the true benefits of refinancing and is this option right for you and your ongoing needs?


The benefits

  • Refinancing may allow you to find a better home loan with a cheaper rate. In turn, refinancing may allow you to either pay off your mortgage faster or lower your current repayments
  • Refinancing will enable you to access equity in your property which you could then use to purchase an investment property or renovate your current property.
  • Refinancing can allow you to switch from a variable rate to a fixed rate. If you’d prefer the certainty that repayments will stay the same for a period of time, you may wish to switch to a fixed rate.
  • Refinancing your home loan can provide an opportunity to streamline your debt and potentially reduce the overall interest you are paying on multiple debts through the process of debt consolidation. It means folding several high interest rate debts into one lower rate debt – which could be your home loan – and reduce your monthly repayments.


As you can see, there are many benefits associated with refinancing. Of course, before you call your local mortgage broker to get the refinancing process started, it pays to take a close look at your individual situation and make sure you know what you are getting yourself into.


Refinancing can come with some significant fees and charges, including:

  • Exit fees: When you pay out of a loan early, exit fees may apply. It is also worth noting that exit fees don’t include break costs, which can be imposed if you leave a fixed rate early.
  • Borrowing costs: When you refinance, your new lender may charge you a range of upfront fees, including a loan application fee, valuation fee and settlement fee.
  • LMI: If you are borrowing more than 80% of the home’s value, you may be required to pay Lenders Mortgage Insurance.
  • Stamp Duty: If you are increasing the size of your loan through refinancing, you may be required to pay stamp duty on the property.


If you decide the benefits of refinancing outweigh the costs, then the refinancing process works in much the same way as applying for your original loan – and Mortgage Choice Richmond can help guide you through the process.

Posted in: Refinancing

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