What is Refinancing?

April 19, 2016
Simon Allen

Refinancing simply means paying off your existing home loan by taking out a new loan. This can be either with the same lender or a different lender.

Who should consider refinancing?

People who should consider refinancing include:-

-         People with loans with an uncompetitive interest rate, or other high fees.

-         People who require a larger loan, for example for renovations.

-         People looking to consolidate other debts, such as credit cards, into a single, lower interest loan.

-         People looking to change from a variable to fixed interest loan, or vice-versa.

How much does refinancing cost?

Less than you might think. For most variable rate loans costs will be limited to a mortgage discharge fee from the original lender ($350-$700) and some land registry fees (usually $270). Since July 2011 banks have been banned from charging exit fees on home loans.

How much could refinancing save me?

On a loan of $350,000 over 30 years, a reduction in interest rate from 5.00% to 4.50% will reduce annual repayments by $1272. If total switching costs are $700 and all other costs of the two loans are equal, refinancing will payback within 7 months.

How can a mortgage broker help me refinance?

Your broker can help you understand the potential costs and savings of refinancing. He/she can identify suitable alternative lenders and lead you through the process of refinancing.

Posted in: Refinancing

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