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.