There are a number of reasons you might consider refinancing. They include:
Refinancing is where you move from one loan to another, usually with a different rate, features or term. It may be with your current lender or another. This could be to get a better rate, access equity in your home, consolidate debt or access more features.
When your broker negotiates with your current lender to get you on a better deal, that is called repricing. This can be a straightforward process and your interest rate or fees change, but the lender remains the same. If they find you a better deal with a different lender and move you across, it is called refinancing.
Refinancing works by taking out a home loan and paying out your existing loan. To refinance a home loan, you need to apply for the new loan. Once the new loan is approved, you will transfer your debt to the new loan with your newly agreed rate, features and term.
Refinancing a home loan usually comes with costs associated. These can include an application fee, property valuation fee, settlement fee and mortgage registration fee for the new loan as well as a discharge settlement fee or break cost (for a fixed-rate loan) to close your existing loan. If your equity in the property is less than 20%, you may also need to pay for lenders mortgage insurance (LMI).
Not all of these fees will be applicable to you and some lenders may waive fees to secure your business. On top of that, some lenders offer cashback incentives where they pay you money to transfer your loan to them.
It is important to weigh up the costs with your potential savings over the life of the loan to determine whether refinancing is a good idea for you. Your Loan Market broker can run these calculations for you.
A number of lenders offer introductory rates and/or cash back incentives for new customers. These can save you money, however need to be weighed up with the longer-term cost of the loan and whether you will be better off than with your current or another loan. Finding the right home loan to refinance to is a broader picture – your Loan Market broker will also consider the structure of the loan, features, term, fees and ongoing rate to determine the right option for you.
Now you can see that not all loans are equal, and there are many considerations when it comes to comparing your current one to others on the market. Not only could you potentially save money by being proactive with your current lender or refinancing, but you could also find a loan that better suits your needs.
Whether interest rates are rising, dropping or staying level, remember lenders want your business and there could be attractive options available. If you don’t ask, you don’t get.
A broker can do the legwork for you. All it takes is a quick chat and your broker will do the rest.
Your broker will look at:
Let us know what your goals are and we will connect you with a Loan Market broker directly.
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In its meeting today, the RBA board decided to hold the cash rate at 4.1%, giving reprieve to homeowners. As interest rates have increased in line with the cash rate hikes over the last year, it has become harder for some mortgage holders to refinance their home loan. However, to overcome this, some lenders are...
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