Carrying out a full financial review on the loans on your principal place of residence and investment properties can improve your cash flow substantially. Sounds appealing.
To refinance is the process of paying out your current loan by taking out another loan.
It could be through your current lender or by switching to a different lender, who may offer a more attractive package that is better suited to your financial needs and property investing goals.
There are many reasons people choose to refinance their home loan, which depends on their goals and how they may change over time.
Situations that may lead to you wanting to refinance are:
- Lifestyle changes (births, deaths, illness)
- Change of principal place of residence
- New/loss of jobs
- Interest rate changes
- Relationship changes (divorce/marriage)
- Purchasing a new investment property
How could refinancing benefit me?
- Access your home equity:
If you are an investor planning on growing your property portfolio, then you could access equity to help purchase new properties.
Or it could be used to go on holidays, undertake home renovations or just free up some much-needed cash for items such as a new car.
- Consolidate debt:
If you are trying to manage several loans, you could combine them under a lower interest rate loan, which will help to reduce your monthly payments and get your finances in check.
Learn more about good and bad debt here.
- Match to your goals:
If you have a variable home loan it might make more sense to switch to a fixed interest loan, or vice versa if you believe rates could rise in the near future.
Learn more about pros and cons of variable vs fixed loans here.
(Keep in mind that you don’t always need to refinance to do this. A mortgage broker could give you further information on your specific loan).
How do I refinance?
By using a qualified and experienced mortgage broker it can be simple to discover if refinancing is right for you.
An experienced mortgage broker can easily sift through hundreds of loan options by different lenders to see if there is a better option out there for your financial situation.
Fees associated with refinancing
Some of these fees can be negotiated or exempt, especially if you remain with your current lender, but refinancing may consist of the following:
- A loan application fee - This is usually charged when you apply for a new home loan.
- Valuation fee - You might see a fee from your lender for having your property valued by a professional property valuer.
- Settlement/Exit fee - You may be charged to pay out your current loan
- Ongoing fees – Some home loans will charge on ongoing fee
- Lenders mortgage insurance – This is charged to cover the lender in the event that you are unable to make your loan payments.
How can a mortgage broker help me?
- They help you understand the costs/process involved in refinancing.
- They can be more understanding and flexible than a big bank as they are not usually affiliated with any one lender.
- They are with your for the entire journey from the loan application process to settlement.