Make sure you are not overpaying on your home loan by regularly looking at how refinancing might help you. By doing this, you can save money, get a better interest rate, access your equity or add features like an offset account.
Whatever your reason for home loan refinancing before you go shopping around, it would be beneficial to get a better understanding of your options and what is involved.
There's a range of reasons you may consider refinancing from saving money on mortgage repayments to consolidating your debts or even accessing your equity. No matter your reason, there are different benefits to all.
Interest rates often change, and lenders are always offering deals to entice new customers, so it's not hard to find an offer that will save you money.
You can also go back to your current lender and see if they are offering better interest rates to new borrowers. If they are, give them a call and see if they will provide you with the same deal.
Switching to a new lender comes with costs, so if you can call your current lender and negotiate a better deal, it can make refinancing simpler.
One of the main reasons people look into refinancing their home loan is because they have accumulated other debts and want to consolidate them. Whether it's a car loan, credit card or personal loan consolidating your debts not only simplifies your finances but can also save you money.
The interest rates offered on home loans are often lower than other debts, which makes consolidation a viable option. Interest rates may be lower, but a home loan is a longer-term debt which means you may end up paying more interest in the long term.
If you have a principal and interest home loan, your repayments have been building something called equity. And once you have built up some equity, you can then refinance to access and withdraw this equity and spend that money now.
There are a few reasons you may want to access the equity in your property. The first would be to do renovations on your existing property to fix anything that may have been damaged or worn down over time. Renovations such as updating your bathroom or adding solar panels also adds value which add equity to your property.
Another reason you might want to access your equity is to build your property portfolio by purchasing a second property. Using the equity from your current property, you may be able to pay a deposit and the upfront costs for the purchase of another property. But only if you've built up enough equity to cover these costs.
When you first took out your home loan, you may have only needed a basic no-frills loan with low fees and a low-interest rate. You're now a few years in and are thinking about how other features could help you to repay your home loan sooner and organise your budget.
Whether it's an offset account, redraw facility, cashback offer or some other attractive home loan feature before you jump at fancy features, do your research. You want to get a home loan that suits your needs, not just one with an attractive offer.
If you've decided to move to a new property, you may be able to take your home loan with you. But this may also be an excellent opportunity to review your current home loan and see if you can get a better deal.
You might have a principal and interest home loan and need to switch to an interest-only home loan for a while, or you may have a variable rate home loan and want to change to a fixed rate. Or you might just want to bring all your finances to the same financial institution.
Getting a handle on your finances is always a smart decision and refinancing your home loan is just one of the options you have.
Just like the above reasons to refinance your home loan, there are some reasons now might not be the best time to refinance or change your home loan.
If you have a fixed rate home loan and the fixed term hasn't expired you will incur break costs when you refinance. These costs are often relatively high and are best avoided if you can.
If you originally borrowed more than 80% of your property's value, you would have paid lenders mortgage insurance (LMI). If you want to refinance, you will need to have built up at least 20% equity, or you will be asked to pay another LMI premium.
Consider whether the savings you might make by refinancing outweigh the additional costs such as LMI.
The property market is often seen as the "safest" investment due to its usual stability or the tendency for property values to increase. The market also has downswings, and if you look to refinance your home loan during this time, you may not end up saving any money in the long term.
It would be better to hold off until there is a shift in the market that increases your property value.
Refinancing your home loan is a reasonably straightforward process, but it does come with some fees that you will need to pay.
You've thought about why you would or wouldn’t want to refinance, the costs that may be involved, it's time to get down to how refinancing works.
Before you jump into the process of home loan refinancing, it would be best to take a look at your current situation and see where you’re at.
Once you have a good overview of your current situation, you can move onto getting to know what your options are for home loan refinancing.
Do as much research as possible. There are many home loan options available with different interest rates, fees, loan structures and features.
One great tool that will help you with your research is a refinancing calculator, it enables you to compare the old and new home loan to see how much you could save.
Once you have reviewed your current position and done the research to find a new home loan that has all you are looking for, it's time to refinance your home loan.
The process for refinancing your home loan is slightly different if you stay with your current lender than if you switched to a new lender.
Keeping your mortgage with your current lender may be more straightforward as you don't need to change any details and you may save on fees depending on your lender. However, you may get a better deal from a new lender as most home loan lenders offer their best deals to new customers.
Before you jump ship to a new lender, give your current lender a call and see if they will match any offers from other lenders.
When you are refinancing your home, you still need to put in an application, even if you're staying with your current lender.
At Yard, you can put your application through online, and one of our home loan consultants will call you within 24-hours to talk you through the rest of the application process. They will let you know what supporting documentation is required as part of your application.
You will then need to submit the supporting documentation including:
After these documents, and any other documents requested by your loan consultant, have been received Yard will conduct a property valuation. This is to validate your estimated property value and will be done online, depending on your loan-to-value ratio (LVR). If there isn't sufficient information to complete the valuation online, an in-person valuation will be done.
Once the valuation is complete, and our credit team reviews the valuation report, we will make an assessment on your application. If approved, we will send you through your loan documents via email for you to read, sign and return.
Once your new home loan is approved, your previous home loan will need to be discharged. The two lenders will go through this process without any input from you, your new lender will send a discharge form to your previous lender. They'll exchange all the necessary documentation and process the title transfer for you.
Your new home loan will then enter the settlement stage, and your new lender will work with your previous lender to pay out your old home loan. If you have accessed your equity, you should also receive these funds or be told how to access them.
As you can see, the actual process of refinancing your home loan is pretty simple. Still, you don't want to skip over all the research and analysis before you pull the trigger. The more informed decision you make, the better off you are likely to be. If you have decided home loan refinancing is right for you, make sure to check out Yard's range of home loans.
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