Loans and mortgages are a complex topic, and refinancing can be even more so. You may not even know where to start, so we’ve put together this short guide to help you find out how you can refinance your home loan.
Evaluate the cost
Before anything else, we have to be sensible and ensure that you are getting what you expect out of refinancing your loan.
There are costs associated with the procedure. Depending on whether you choose to stay with the same institution but a different loan scheme (internal refinancing) or switch to another lender (external refinancing), the costs can vary by a significant margin.
Both types of refinancing have their benefits, particularly when considering cost. Switching to another institute can incur additional damage in the form of exit fees (unless you have taken a loan out after 2011), as well as the usual application and loan approval fees that you still have to pay even when remaining with the same lender.
It is important to evaluate whether these short term costs are worth the long term gain, or would eat far too much into the difference to make it worthwhile.
Find the right loan and apply
Your options for home loans are almost endless. From the many different types of loans, interest rates, additional features and even lenders, there’s a lot to think about before you can find the right loan. Do you want to be able to repay your new loan back quickly with extra repayments? Do you simply desire a lower interest than you are already paying? Do you need to make smaller or larger monthly repayments?
All banks and most lenders will have a number of refinancing loans available. Ensure that you know what you are signing up for and that you are getting a great deal. These are all things you have to consider when refinancing, and it can obviously be overwhelming. There is also the matter of organising the paperwork for the process, which adds even more pressure.
You may find it easiest to speak with a mortgage broker to help you find the loan that suits your exact needs and doesn’t hold any nasty surprises that might trouble you down the road.
Don’t make the same mistake
There are lots of reasons to refinance your loan, but one of the most popular is to make your current debt easier to manage. Whether you are transferring your credit card debt to your home loan or just need to release some equity, you do not want to find yourself falling deeper into debt with your new loan. Ensure your mortgage repayments are part of a sensible budgeting plan.
The Commonwealth Bank offers the following tips:
Make more frequent repayments. You could pay fortnightly instead of monthly, manufacturing a huge difference over the long term.
Make larger repayments. You are often entitled to pay more than the minimum each month. Use this advantage to own your home sooner.
Make lump sum repayments. Obviously this is only available with certain loan types, so make sure you do your research beforehand.
The most important step is to ensure you get the right advice. Speak to us today to find out the answers to all of your refinancing questions.