Refinancing 101

February 23, 2015
Ali Batten

With interest rates hovering around record lows and Australia’s lenders aggressively competing for business, now may be a great time to refinance. Refinancing your home loan can help you to put money back into your pocket as you may find there is a better deal out there for you with a different lender.

Of course, saving money isn’t the only reason to refinance. Some may be looking to streamline debt or unlock equity in property to fund renovations. Before you start research into refinancing your home loan, there are a few things you should consider. 

1. Establish why you want to refinance.

You want to have a clear idea on whether you are looking to access equity in your existing property/ies to say, buy or renovate an investment property, or if your aim is to reduce your repayments, shop around for a better suited deal or consolidate your other debts into your mortgage, etc. Your goal will influence your loan choice and ultimately your decision to refinance.

2. Understand your current loan better

Before you start shopping around, make sure you fully understand all aspects of your existing property loan. This includes your interest rate, type of rate (variable, fixed or split), the available features and any fees. Keep in mind that while mortgage exit fees were abolished in 2011, some existing loans may still have them attached. At Mortgage Choice Newtown, we can help you find out if this applies to your current loan and if so, keep an open mind as there are plenty of deals on offer that could still make refinancing worthwhile.

3. Determine your needs – both current and future

Now that you have a clear goal and a better picture of your current home loan, it’s important to know what loan features you need. You should ask yourself questions such as whether you want the cheapest loan, no matter what or if you want loan flexibility that gives you the ability to make extra repayments and redraw funds in times of need. If you choose to go ahead and refinance, knowing what loan aspects are important to you now and in the future will make the decision process easier.

4. Understand the process

Once you have identified the type of mortgage you want, refinancing works in much the same way as applying for your original loan. It is important to know how the refinancing process works and what will be required of you as this will help the process run smoothly.

5. Work out the total cost of refinancing 

Many loans may initially look cheaper than your current loan due to a lower interest or fewer fees, but it’s important to do a full cost versus benefit analysis of switching from one loan to another. This will help you sort the fact from the fiction before making your decision.

6. Seek professional advice

At Mortgage Choice Newtown, we will be able to help you weigh up the pros and cons of refinancing. In addition, we will be able to explain the costs associated with refinancing. Finally, we can help you find the right product for your needs.

7. Shop around and be prepared to negotiate

There is an abundance of loan products on offer from a wide range of lenders, so make sure you check out as many options as possible.

8. Talk to your current lender

It is important when refinancing not to rule out your current lender. Speak to your current lender about your plans to refinance and let them know that you are looking around. With lenders competing so aggressively for business at the moment, you may find your current lender is willing to sweeten your current deal.

9. Get your paperwork in order

Once you have decided to refinance and determined which lender etc you will use, it is important to prepare all the necessary paperwork to ensure the process not only runs smoothly but efficiently. When refinancing, make sure you have your most recent pay slips on hand as well as statements for your existing home loan and any other loans, your latest council rates notice and evidence of the building insurance policy you have in place for your home or the property to be refinanced. Once your loan is approved, your new lender will pay out your current loan on your behalf and you can commence repayments on the new loan.

 

Contact either Owun, Suzanne or Costa on 02 9517 1818 or newtown1@mortgagechoice.com.au to discuss your options. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042.

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Posted in: Refinancing

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