Whether you have or haven’t, you probably have a bunch of questions around refinancing your home mortgage. To help you explore the concept, understand whether you should look at refinancing, and discover how to refinance a home loan should you choose to, we’ve put together this handy guide.
Refinance Mortgage: All your questions answered!
What is refinancing?
A mortgage loan refinance is when your existing home loan balance is paid out, i.e. The loaned money is paid back in full, and a new home loan is taken out in its place.
The new loan can be taken out with your current lender, such as the same bank, or you could move to a new lender.
Why would you refinance?
Refinancing can be a financially sound strategic move to help you save money with a better interest rate or achieve specific goals with a different loan with better terms. Banks and lenders also offer promotions and various incentives to prospective customers to help encourage them to move their business, a.k.a. Their mortgage, over to them.
Should you refinance?
The answer is… it depends. Your home loan is likely the biggest single expense in your monthly budget so it makes financial sense to want to keep the repayments each month as low as possible. A refinanced mortgage may offer you the chance to do exactly that.
There may be other benefits too. You could be interested in building up your equity at a faster rate, meaning you want to make extra or over-payments. A loan refinance may unlock certain flexibility in this regard that you didn’t have before.
Or you might want to refinance to access the equity that already exists to help you find another property to purchase such as an investment property. Lastly, you may want to consolidate personal debt into one loan (in this case, your mortgage). It can be easier, more convenient and even cheaper to have all of your debt in the single spot.
At the end of the day, it all depends on the offers on the table and your own goals and circumstances.
How do you know if refinancing is right for you?
The right decision is an informed decision. When it comes to refinancing a mortgage, you want to think clearly about your current circumstances, your financial goals and your objective in considering a home loan change.
Make sure to speak to a specialist broker from Loan Monster today. They’ll walk and talk you through the process, step by step, to ensure you make the right call.
When is the right time to refinance?
Again, this depends on each individual and their financial situation and goals. It’s not always the right time to refinance a mortgage.
Here are some considerations to take into account.
1. Longevity in your home
If you’re planning on moving and selling your home in the short or medium term, it might be best to refrain from refinancing and incurring the costs involved.
2. Income
Your income stream(s) is an important factor here. If you’re earning more and would like to be paying more into your home loan, then it is likely that refinancing could be a good option.
3. Change in circumstance
Changes in your financial or personal circumstances could require refinancing. You may want to get a better rate to take advantage of market conditions. You could be leveraging an improved credit score. Or you may just have a new long term financial goal that would better be served with a refinanced mortgage.
How often should I refinance my home loan?
There’s no set rule on how many times or how often you can refinance your home. As long as you meet the requirements of your chosen lender and their offer. If your credit history is strong, your income demonstrably stable and your assets secure, this shouldn’t be a problem.
Loans can be financed as often as you would like but there are often costs associated with the process. It’s important you consider these costs and weigh them against the savings you’ll be making from refinancing.
What costs should you consider when refinancing?
1. Fees
Banks often apply mortgage discharge fees or break costs to a home loan, especially if it has a fixed rate. Even lenders with no cost refinance options usually cover the costs of closing by offering a slightly higher than average interest rate.
2. Insurance
Insurance, such as Lenders Mortgage Insurance, may be applicable if you own less than 20% of your home. Unfortunately, insurance cannot be transferred so you’ll have to take out different insurance which could come at a different cost.
3. Interest Rate
One of the most common reasons for refinancing is to take advantage of better interest rates. Make sure you’re across the different rates on offer, determine whether you want a fixed or variable loan, and understand the terms of the new mortgage.
How do you refinance?
The best way to go about refinancing is by having an initial conversation with a specialist refinance mortgage broker. For example you could call Loan Monster on 08 9336 4489 or email us and get a response back within 24 hours at info@loanmonster.com.au.
When you speak to our brokers, they’ll assist you through the process and help you evaluate whether it makes sense for you and your situation to refinance your home loan.
Let’s explore refinancing your mortgage today!
Whether you’ve still got questions about how to refinance a home loan or are ready to get started exploring your options when it comes to your mortgage, the Loan Monster team is ready for you.
So contact us today and let’s start saving you and your family more!
