Refinancing Your Home Loan? When Is The Best Time To Do It?
As a home owner with a mortgage, chances are you’ve heard of the term ‘refinancing’. Refinancing your home loan involves reviewing your current loan, and potentially swapping your loan to another lender. You would do this so the new lender can better meet your current needs, wants and circumstances.
Refinancing your home loan can also allow you to consolidate your debts or pay down your mortgage more quickly.
Another common reason to look at refinancing your home loan is so you can access equity. Equity is the amount you’d get from selling your home after clearing associated loans, selling costs or any other costs associated with the property. Obviously if you weren’t selling, equity would be simply value of your property, less the loan amount. Depending on that amount, you may be able to access equity in the property without selling. You may do this to do home renovations or to buy an investment property.
Refinancing Your Home Loan Is Not For Everyone.
However, refinancing is not suited to everyone. There are many different factors you will need to consider when thinking about refinancing your home loan. Before you initiate an application to refinance, we will need to assess your needs and objectives as well as your current financial situation.
So how will you know that refinancing your home loan is the right option for you?
The first step is to speak to a professional, such as Dennis Smallwood. He will look at your needs and whether you can afford a different loan structure. Also he can look at what other changes can or should be made to your mortgage, particularly if you have more than one property.
Are you looking to pay less interest?
Some people are savvy researchers and will want to take advantage of a lower interest rate from another lender should that be available to reduce repayments. If you aim for a lower interest rate, refinancing your home loan could potentially save you a lot of money in the long term.
While saving money is often one of the biggest benefits of refinancing your home loan, it may not be as straightforward as that and careful consideration is required.
At this point, Dennis will need to find out about your existing loan, repayments, interest rate and current loan structure.
He will also need to find out more about your current financial situation. This includes your income, any other current debts and about any assets you own.
The current value of the property is also a major factor to take into consideration. Dennis has access to current data that will indicate what your property is likely to be worth.
A review of the various loan options can then be done to figure out whether it’s worthwhile to refinance your home loan. Sometimes it’s not worth it if it’s only going to save a couple of hundred dollars a year. Particularly when you take into consideration the exit and application fees involved. It may cost up to $1000- in bank and government fees when refinancing your home loan. This will depend on your current lenders fees. However, if it’s going to save upward of $1,000 a year, refinancing might be a sensible approach. (Note, there are many offers from lenders giving you ‘cashback’ to refinance to them)
Dennis can also tell you if getting a lower interest rate from your current lender can be achieved without refinancing.
Do you want to change your loan type?
A risks of refinancing your home loan is you may need to pay Lender’s Mortgage Insurance (LMI)* to a new lender. If switching your loan means you will need to pay LMI again, it may not be worth refinancing your home loan. Unless you are on a horrible interest rate now.
If you do refinance, working with Dennis rather than going straight to a lender has advantages. Dennis has access to loan options from a range of 30 different lenders. If there’s a better opportunity for you, then Dennis should be able to access it.
Have your circumstances changed?
If you had a recent major life change such as a because of a loss of income or a change in marital status, you might be looking at refinancing your home loan
If you want to refinance or consolidate to lower lending costs to help you manage your monthly repayments, speak to Dennis Smallwood and he will negotiate with your current lender for a rate suitable to your current situation.
Dennis can also help you look at alternate options. Maybe consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments. It may also help you keep your repayments on time and even save you interest in the long-term.
*LMI protects the lender against potential loss.
The Home Loan Comparison Co. compares home loans from a much wider variety of banks than most people have time to consider, and we find the loan that suits your goals.
We are experienced, knowledgeable and dedicated to building ongoing relationships to keep on providing personal and valuable service that is rarely experienced when dealing with the banks.