Home Loan Refinance
Refinancing allows borrowers to obtain a loan better suited to their current circumstances.
Be sure to find out what your existing loan is costing you and compare that with whatever refinancing you are offered. Also compare features of the new and old loans and factor in changeover costs.
There are two types of refinancing:
- An internal refinance, which is where you switch mortgage products but stay with the same lender
- An external refinance, which is where you switch everything, including lenders
Before you get too confused by the range of options available on our Home Loan Finder, there are certain factors you should consider.
What are the maximum LVR options for Refinancing
- You can Refinance to a maximum of $750,000 to 95% of Property Value with minor consolidation but no cash out.
- You can Refinance to 90% of Property Value with debt consolidation
- You can Refinance to 85% of Property Value with unlimited debt consolidation
- You can Refinance to 80% of Property Value with unlimited cash out
When refinancing CAN make sense
- Your lender’s rate isn’t staying competitive with others in the market
- You are looking for more money to pay for home renovations, a child’s education costs, or invest in another property
- You want to consolidate credit card debts or unsecured loans to a lower rate
- You require cash out for investments
When it might NOT make sense
- You are planning to sell the property in the near future
- Exit fees / discharge fees or break costs are high on your exiting home loan (break costs are the costs involved in paying out your fixed interest rate for the remainder of the locked in period)
- If your credit history has changed due to outstanding debts, defaults, judgements making it less likely you’ll get a good rate
- You’ve got an uncertain income over the period of the loan, such as work as a contractor.
- It is important to consider mortgage insurance costs if you are refinancing above 80% LVR
- Consider establishment costs of the new loan.
Switching to a Lower Rate:
Wanting a lower interest rate and lower repayments is one of the more common reasons to refinance. Many borrowers have been frustrated that their lender increased their interest rate by more than what was set by the Reserve Bank of Australia, while other lenders have only passed on the set increase or even less.
Some borrowers also want to refinance to use the equity in their home to pay for home improvements or other reasons. Keep in mind, while allowing you to expand your property portfolio or value, it will also greatly increase the loan term.
Another reason to refinance your home loan might be to consolidate your debts and only have one monthly repayment. The interest rate on credit cards ranges from 10% to 20% and for personal loans the rate can be anywhere from 9% to 15%. By consolidating these debts into your home loan you can significantly reduce the ongoing repayments and save on interest
Major funders are cautious when approving cash out, in particular when they have little evidence of what you are doing with the money. This is because there are a small number of individuals who do not use their equity responsibly or do not use the funds for the purpose they tell the Funder. The majority of lenders have a cash out policy which restricts the amount of money that you can release to as little as $20,000 however there are funders that will allow cash out to 80% LVR. It is always best practice to mitigate cash out so we can fully understand your needs and get you the most suitable loan product available at the lowest rates.
Always compare apples with apples
It is always important when comparing between different loan products to make a full comparison. You can only compare a basic with a basic, one fixed rate with another etc.
If you are still confused we have mortgage brokers that specialise in all Home Loan refinancing. Please complete our Express Enquiry Form or Phone Direct and you can discuss your situation with an expert.
If you wish to proceed, then we will help you to complete all the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the on-going communication between all parties until your home purchase is settled.