Refinancing is the process of signing a new loan to pay out your current home loan/mortgage. Whether you’re looking to refinance so you can benefit from the best home loan interest rates, increase flexibility on your loan or add extra features, making the switch can actually leave more money in your pocket, if done correctly. This is why it’s imperative to look at all options prior to making a decision on refinancing your loan.
Choose the Right Loan
If you’re looking to refinance, you are most likely already aware of the types of loans available to you. From fixed interest loans and line of credit loans to variable rate loans and package loans, there is a lot to consider. Take a step back to see why your current loan is no longer working and which loan actually offers what you need. Be sure to slow down and read the fine print – what may look like a promising loan with a low interest rate may actually charge your more after a set period, or incorporate lots of hidden fees.
Be Aware of what it Costs to Refinance
Yes, refinancing may eventually be more cost-effective and affordable long-term, but you may incur some substantial fees in the initial. These fees can include the loan application fee, valuation fees, settlement fees, lender’s mortgage insurance (LMI), exit fees and stamp duty. Look at your current home loan terms and conditions to have a better understanding of what costs you may incur when refinancing your home loan. It’s better to have these fees under control then be unpleasantly surprised after you’ve been approved.
Gain Better Insight into the Refinancing Process
As with anything concerning large sums of money, being prepared and having an idea of what to expect is half the battle when choosing to refinance. Generally, refinancers talk to mortgage brokers or financial advisors to assist them in finding the right loan. Some mortgage brokers can even assist you with your application. In order to have the best chance at having your application approved, your potential new lender will need to see information regarding all your loans, six months’ worth of statements for all home/personal loans, your most recent rates notice and building insurance policies. Once a loan is chosen and approved, you can expect the process to reflect the following:
- Your current lender will be notified of the change and your mortgage being ‘discharged’ or paid out
- A payout figure is given to you once your current lender knows the date of settlement
- Your new lender pays off your outstanding loan
- The deed to your property is transferred to your new lender
Many choose to refinance to help relieve financial stress and benefit from an alternative loan that suits their lifestyle and budget. For more information about the types of loans and interest rates available, talk to a professional lender or mortgage broker who can provide you with a range of options tailored to your specific needs.