A home loan is generally a long-term proposition, but in some situations it can make sense to refinance your mortgage.

Posted in: Insights, News

05/02/2018

Refinancing involves taking out a new mortgage and using those funds to pay off your existing mortgage. Doing so can save money and result in significant financial gains over time.

Why you might refinance

You might want a lower interest rate.

The lending products market is highly competitive and interest rates can vary significantly between banks. One of the most common reasons people choose to refinance their mortgage is to secure a lower interest rate from another lender. This could assist you to pay off your home loan sooner, potentially saving you thousands of dollars. 

That makes sense, but before taking any action it’s a good idea to speak with a Mortgage Adviser. They can not only look for a better interest rate for you but also help find you the type of lending facility that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender. Either way your Mortgage Adviser will help with the right advice.

Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan. The interest rates, fees and the features need to be carefully considered and your broker can help you to navigate the options.

You want to change your loan type

You may want to switch from a variable loan to a fixed loan with your existing lender, to lock in a low interest rate. Depending on the type of mortgage you have, this may require refinancing into a different product. You might also have to refinance if you want to change to a split loan, which has part variable and part fixed rates.

You want to renovate or purchase an investment property

Another reason refinancing might be an option is because you want to renovate your home or buy an investment property. If you have equity in your home, you may be able to access some of the equity by refinancing your mortgage. (Note that you could also do this by redrawing or increasing the limit on your existing mortgage.) Your Mortgage Adviser can help advise on the best option for you. Before going ahead with an increase or refinance, your home may need to be revalued and your Mortgage Adviser will advise how much you can borrow.

Your circumstances have changed

Refinancing could also be suitable if your circumstances have changed – for example, a significant change in your income. By taking out a new mortgage (or increasing your limit on the existing mortgage), you may be able to consolidate other debts, including personal loans and credit cards, into one facility, lowering your monthly payments and saving you interest.

While refinancing can save money, it may not be right for everyone. Consider your financial situation and ask yourself whether refinancing is right for you .

The refinancing process

Getting the refinancing ball rolling is simple once you’ve determined your needs and done your research through your Mortgage Adviser.

The application. Your adviser will evaluate your circumstances and assist you in submitting your application. You’ll be asked to provide identification documentation and proof of income such as pay slips, and to list your assets and liabilities. If you’re staying with your existing lender, you may not need to provide as much information.

Getting a valuation. Lenders will often require a valuation on your existing home to determine how much you can borrow. This bank valuation happens during the loan approval process and generally requires an inspection of the property by a licensed valuer.

Receiving approval. Once the lender is completely satisfied, full loan approval is granted. You’ll receive an approval letter with a copy of the loan contract to review, sign and return to the lender.

Your funds will be cleared once all the signed documentation is reviewed. Your lender (or your new lender if you’re changing lenders) will arrange settlement of your existing loan and establishment of your new loan.

A Bernie Lewis Mortgage Adviser can look at your individual situation and help you determine whether refinancing your existing loan would be beneficial. Call us today on 8300 8300 to discuss your options.

The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice.