A significant dip in interest rates is usually the ideal time to consider refinancing your home loan. This involves switching your loan to a different lender or locking in a lower interest rate from your current one. Doing so can have many benefits, such as saving thousands of dollars throughout your loan tenure. Moreover, you could improve your financial position with better repayment terms or loan features.
Before you can enjoy these advantages, it’s necessary to understand what a refinance home loan is. Why doing your research is even worthwhile to change your lender or when is the best time to refinance? The answers to all these questions can be found in this blog. Let’s go through the overall process of refinance a home loan and understand how to get the most out of it.
What Is Refinance Home Loan?
When you refinance your property loan, you move the balance amount you owe from one lender to another or change terms with your current one. This could mean you finance a new loan with a different principal amount and interest rate. It’s a great opportunity to choose an entirely different product from your existing one. Perhaps a loan should come with:
Lower annual interest rate
Features different from what your current lender offered
Fewer fees and extra costs
Minimal revert rate
Common goals that borrowers achieve from refinancing are reduced payments over the loan’s length and changes in the tenure of the loan. You have many options to choose from – switching your variable rate home loan to a fixed rate is one. Another favourable choice is splitting your balance home loan amount into two new ones with different tenures.
The main purpose is to get the most benefits out of your mortgage. So, you don’t end up paying more money when there’s a possibility of enough savings. Depending on which lender you switch to, refinancing might even come with incentives like cash back or waving off associated costs.
When Should You Refinance?
Homeowners, generally, refinance their loan as a new lender’s offers are best suited to their circumstances. Though it’s not a necessity, present market conditions and your situation will influence your decision. A thorough review of your loan will be beneficial if any of these factors have changed since you first secured it. You can do that on your own or get help from a professional reviewer like Mortgage Friend. We’ll ensure your current mortgage still meets your needs and, if not, suggest a better product.
You might want to refinance your mortgage to:
Grab a Lower Interest Rate Product:
This is the most common motivation for refinancing. As interest rates are recurrent, many borrowers consider refinancing when rates dip. Remember, key factors like market competition, the economy, and Australian monetary policy can cause interest rates to fall or rise.
Reduce Monthly Payments:
Securing a new cheaper interest rate will lower the regular monthly mortgage payment, saving you thousands of dollars. Plus, it gives you more money to spend on other needs.
Change Loan Terms:
A longer loan tenure means reduced monthly repayments, making it easier to meet your debt-to-income ratio requirements. On the contrary, shorter terms mean getting free of your home loan debt quickly. Home loan refinancing gives you options for both.
Convert Interest Rate Type:
When you want to change your adjustable rate home loan to a fixed one, refinancing is a feasible solution. The general rule of thumb is to do it when the interest rates are low.
Tap into Home Equity for Cash:
Another reason to refinance your loan is to take out a cash value from your home’s equity to fund other purchases. For instance, to renovate your home or pay off debts.
Benefits of Refinancing Your Home Loan
How long does it take to refinance a home loan, you ask? Thankfully, it doesn’t have to be a daunting process. Besides, it’s worth putting some effort and time into thinking about why you want to do it in the first place. Well, with refinancing, you could get the following potential benefits:
Save Money:
Have you been paying off your loan for years now? If yes, there could be a scope for you to save. You are entitled to more savings by financing a new loan with lower interest rates and monthly instalments.
Pay Off Your Loan Sooner:
Reduced overall interest, payable with refinancing, is directly proportional to a reduction in your total home loan balance. Chances are you’ll succeed in finishing off the loan sooner.
Free Up Your Home Equity:
As a homeowner, you need funds for renovation, building new floors, or investing in other properties. In order to meet your lifestyle goals, you could consider refinancing.
Consolidate Debt:
Are you stuck in a stressful situation of having multiple debts? Then, refinancing your home loan is a golden opportunity to streamline your cash flow. By consolidating your debt into your new home loan, you may lower your monthly repayments.
Get Better Loan Features:
Many lenders offer exciting facilities to entice new buyers. If your current loan does not fit your purpose, refinancing is the way to go.
5 Steps to Refinancing Your Home Loan
These are the five simple steps you need to follow to refinance house rates:
Understand Your Reason for Refinance:
Your goal should be to get a clear idea of why you want to go for refinancing. Is it the lower interest rates or better loan facilities? Maybe you’re looking to invest in a new property and need some funds. Whatever your motive is, keep it defined.
Look Out for Home Loan Options:
Compare loan offers online to examine what other lenders are providing. You can also check with your existing mortgagee if they agree to offer you similar benefits. If the process seems hectic, seek help from experts at Mortgage Friend to simplify your loan refinancing.
Submit an Application:
The procedure for applying for a new loan is pretty much the same as you did the first time. You’ll need to fill out the application form and arrange the necessary documents.
Discharge Your Current Loan and Settle a New One:
Congratulations, if you’re approved for your new loan. Your new lender will discharge your old loan once your current one gives you a final payout figure.
Start Paying Instalments for Your New Loan:
Once you receive the documentation for your new loan, you can begin making monthly repayments.
So, these are some key steps to refinance your existing mortgage. This whole process could take about a few days to over a month, depending on various factors. They are your loan’s complexity, preparedness, and lender’s processing times. Similarly, how much it costs to refinance your home loan will vary based on your individual circumstances.
Get a Free Loan Review from a Skilled Team – Mortgage Friend!
Everyone’s situation is different when looking to refinance a property loan. This is when the expert's advice matters. Mortgage Friend is your local loan agent who has up-to-date knowledge about what’s happening in the current market. We can do all the legwork on your behalf so you get the most favourable refinancing option.
If you’re looking to lower your monthly repayments or perhaps you’re due for an overall mortgage health check-up, rely on our expertise. Contact us on 0407 949 044 to get a reliable solution for refinancing your home loan in Melbourne. Alternatively, you can email us at jkassoc@arc.net.au and accelerate your financial health today!
