If you already own a home, you would have probably heard about the term “refinancing”. But before you even think about refinancing your mortgage, it is important for you to understand what refinancing is, how it works and how it will affect you and your bottom line.
In its simplest form, refinancing is the replacement of your current home loan with another home loan under different terms - either through your present lender or a different lender.
Refinancing could be an opportunity to secure a lower rate or to extend the length of your loan, with potential savings on monthly repayments and a reduction in your total interest costs.
You may find that you can lock in at a lower fixed rate that will protect you from further rate rises in the short term, or you may be able to secure a lower variable rate that could drop even more in the future.
Refinancing could also mean enjoying improved loan features that may help you to pay off the loan sooner - for example, using the option of an offset account that will save you interest on your home loan daily.
Alternatively, you can extend the length of your loan and potentially take advantage of substantially reduce your monthly mortgage payment.
There are other circumstances when a home loan refinance makes sense. It could be a way to tap into your home equity to achieve personal goals like the purchase of an investment property or a new car.
Lenders will allow you to access the equity in your home by getting a line of credit based on the value of your home and the amount that you have already paid on your mortgage. This is a great way to fund home renovations, pay for university costs or make an essential big-ticket purchase.
A home loan refinance could also be used to streamline your personal finances through debt consolidation of credit card debts, car loans and other personal loans that you might have taken on over time.
To ensure that you are getting the best deal, you will have to choose a lender when you are refinancing, and the interest rates and fees offered by each lender can vary widely. It is important for you to calculate the total cost of refinancing by taking both interest and fees into account. Our mortgage broking service can help you get the best deal by allowing you to compare offers from many different lenders.
While there can be some fantastic benefits in refinancing your home loan, it is important to remember that there are new costs involved in refinancing your mortgage. It is important to weigh up the different expenses that can be involved to make sure it is the right choice for you.
While refinancing costs will vary from borrower to borrower depending on their personal circumstances, as a general rule of thumb, refinancing could potentially cause you to incur the following costs: Exit fees, Borrowing costs, Lenders Mortgage Insurance, and Mortgage Stamp Duty.
Today’s home loan market is highly competitive, and new features and greater flexibility continue to be introduced to lenders’ product suites all the time. So even if you’ve had your current home loan for just a few years, it makes sense to check that you still have the loan best suited to your needs and if refinancing your home loan will provide you with adequate benefits that will outweigh the costs involved.
To find out more book an appointment using the link on this page or fill out the appointment form, or ring us on 8432 5688.