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How do I refinance my home loan?

So, you have decided to look into refinancing your home loan? That’s great. As a mortgage broker, I speak to many clients every year about the possible advantages that refinancing can bring to them.

It is true, that not everyone who has a home loan would necessarily benefit from refinancing their home loan. It is largely dependent on what’s your current; loan to value ratio, loan rates and terms & as well as how long you have held the loan. In many cases, there is definitely both a long & short term benefit to refinance. If this is you, this article will explain the key steps to refinancing your home loan and either lowering your payments or lowering your total interest and fees and charges expense over the life of the loan.

1. Make sure you are refinancing your home loan for the right reason.

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Refinancing an existing home loan is a great choice in the following circumstances.

Debt consolidation

If over the years you have found yourself acquiring other debts, whether large or small it might be advantageous to move these additional liabilities into a separate split under your home loan, so you could pay it off as quickly as you can. Whether credit card debt, other personal loans or store cards, a debt consolidation loan that uses the equity available in your home is almost always going to lower the overall interest rate for the various debt facilities and bring down monthly repayments. This relief can provide additional cash flow for your family month to month and often be a huge help during budgeting. However, I strongly recommend committing yourself to a disciplinary budget and avoid spreading the consolidated debt for the remainder of your home loan.

Releasing equity

If you have managed to gain significant equity in your home, whether due to time (having been servicing the mortgage for a number of years) or through property value increases (which have slowed down recently, but can still be significant), you may be eligible to draw on that equity to make another large purchase, for example a new car, home renovations or the acquisition of an investment property. Now, this can be a difficult process and greatly depends on how the lender seeks to ascertain the current value of your property. If you are considering this option, Easy2Mortgage professional mortgage brokers are ready and have the skills & resources to ensure you have the correct documentations. In addition, we could arrange an upfront valuation for your home to give your Refinance application fair chance of success.

Taking advantage of lower interest rates

It is true that we are currently experiencing some of the lowest interest rates of the past 20 to 30 years due to a number of different factors. If you have held your mortgage for an extended period of time, chances are you are going to be able to get a lower interest rate than what you currently have. This could reduce the term of your loan as the lower repayments means you can pay additional repayments and minimise the interest charges to your loan account while the rates are historically low. This being said, a loan with a lower interest rate isn't always a better loan. There are a number of other charges and fees that need to factor into the overall cost of your loan before we can accurately make that comparison for you.

Low doc loan holders

If you are on a low-doc home loan & your employment or financial situation has improved, you may now be eligible to get approved under a full doc home loan, which is always going to have better products, fees and rates. Anyone who went down the path of low-doc loans in the past, and now they have an improved financial situation, they should definitely speak to our mortgage brokers, as these loans are often quite more expensive than a full-doc home loan product.

2. Pull out the calculator and do your numbers.

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Finding the true cost of a home loan isn't that complicated. Once you have considered the annual fees and charges, as well as the interest rate, repayment amounts and amortisation schedule, it is fairly simple to see which loan offers a better long-term gain for you and your family. That being said, if numbers aren't your thing, you can always speak to Easy2Mortgage expert to ensure that you have a clear understanding of the comparison between your current loan, and a new loan you might be considering.

Things you should be considering in addition to the standard fees, interest and charges are:

  • Early exit costs
  • Home loan application costs
  • New facility establishment costs
  • Loan approval fees
  • Settlement and handling charges on the loan should you proceed
  • Mortgage stamp duty
  • Lender’s mortgage insurance
  • New registration costs
  • Ongoing account fees on the loan

You should only consider refinancing if you can reasonably recoup these costs in a short time span of around 1 to 3 years.

3. Have your documentation ready to go

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It is vital that you have all the documentation ready to go before applying for any new loan. To refinance or get a new home loan approved in 2019, it would involve much more requirement from banks, due to Royal Commission findings. It’s most likely, you’d require to provide some additional points of documentation since your last application, so make sure you speak to our experts to understand everything you’d need to know, to improve your chance of success.

Things you will need to have

Below are some of the documentation you will need to provide with your loan application;

  • Living Expenses
  • Prove of Income
  • Past 6 months bank statements, including consolidated debt’s accounts
  • Identification documents, 100 point of ID
  • Current credit report, although it’s not a requirement, it does help us to understand & prepare for possible questions from bank.
  • Upfront valuation, to ensure the requested Refinance funds will not incur Lenders Mortgage Insurance.

In addition to the provided documentation, our mortgage brokers will explain the particular circumstance around submitted documents in their “Broker Submission Note” and lodge it with your application, to increase your chance of getting a quick Formal Approval.

Before you decide to sign on the dotted line, I strongly recommend to have a chat to our friendly Mortgage Brokers or ask your lender;

·       Can I make additional repayments, and is there a limit on this?

·       What are the exit fees and charges if I pay my home loan off ahead of the term?

·       Can I receive an interest rate reduction without having to refinance?

·       When you’re comparing your repayments with the new lender, ensure your loan term is the same as your existing loan term.


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