What is the Best Way to Refinance a Home Loan or Home Mortgage?
Start with good solid information!
Like many people, you are eyeing off the super low interest rates available to day and wondering if you are getting the best deal. You may be stuck in a fixed rate home loan and paying a much higher interest rate and would love to refinance your mortgage.
Well you should do this sooner rather than later as every month you do not refinance your loan your repayments are more than
The best way to start the loan refinance process is with a valuation report. This type of detailed factual information is available for free on our website www.homevaluationguide.net.au. Just scroll to the top of the page and enter your property address.
All the banks and finance companies are desperately chasing new home loans with good quality borrowers. The home loan market, particularly for owner occupier residential property, is hyper competitive at the moment. How well you present your information to the lenders support a new loan application will have a lot of influence on just how good a deal you can get when you refinance the existing home. You can change your home loan into one of the lower interest rate , more flexible loans available today.
What to first consider first when refinancing a mortgage
The main consideration when switching property loans is what is the cost to do this. If you currently have a higher interest rate fixed term home mortgage than there could be considerable “break fees ” as the banks call them to refinance. This means that the bank could charge you a fee, often many thousands of dollars, to close out the loan as it was set up when interest rates were much higher. The banks will not budge on this usually, and you need to fully take these sorts of fees into account. The primary factor with refinancing out of a higher rate home loan is the term to maturity. Meaning how long has the loan got to run.
If it is a few years you will need to calculate the benefit of the lower interest rates now against the cost to change the loan.
Fees charged when refinancing a home mortgage
Lenders fees vary quite a bit and they will offer incentives to refinance your loan with them, but the government stamp duty and any title office charges or council fees will be charged in full. These fees for a straight refinance deal are based on the value of the loan so usually are not negotiable. There are other fees as well that you may be required to pay when refinancing such as; exit fees, break fees, valuation fees, loan application fees and legal fees. As the home mortgage market is very competitive, it pays for you to engage the services of an experience mortgage broker to work with you to get as many of these fees reduced or removed. Again, it is important to add up all the costs incurred when looking to refinance a home loan against the benefits of the lower rates.
Should you refinance into a fixer rate loan or a variable rate loan?
This is the big question most borrowers are faced with. Do i go for a fixed rate loan over a variable rate loan. Tough question, as it is hard to predict which way interest rates are headed. You would be attracted to the very lower variable interest rates you could switch into when you changed your home loan , but will they be low for a long time. If you are someone that has a lot of regular commitments such as cars loan , school fees , travel costs , high household expenses and obviously the mortgage, well you might feel much more secure and content in a fixed rate loan rather then a variable rate. Knowing what your home loan repayments are every month for 3 – 5 years makes budgeting a whole lot easier. It is not hard to make a case for fixing rate refinanced home loan under these circumstances. Having said all that, there appears to be less pressure on the reserve bank to lift interest rates at the moment and with some variable rates on offer of around 3.8 % , well that is a very appealing rate to pay on a home loan.
Should you change lenders when you refinance your home loan or stay with your current bank ?
The world of banking and mortgage lenders has been changing a lot over the last year or two. APRA, the government agency that oversees the banking regulations has been insisting the banks improve their lending standards and get much more information from borrowers. What this means is, it is now quite a bit more involved and sometimes harder to get a new loan application approved. So when you are looking at refinancing a mortgage you need to appreciate that a new lender will require a substantial amount of information from you to complete the home loan application.
The reality here is your existing bank or lender will already have all your current income /expenses and assets details. What many borrowers do not do is approach their current lender and advise them that you are shopping around for a new loan and ask them to provide a new , more competitive loan proposal or you will refinance your home loan elsewhere. Most banks will nearly always come back to you with a better deal. This strategy also has the benefit of not incurring the mortgage change over costs that were mentioned above. The pain factor in not having to go through the drama of the loan application process should also be taken into consideration.
Is a Finance or Mortgage Broker the best way to go when refinancing?
As mentioned above , the regulations surrounding lending standards are getting tighter by the day and a lot more complex. At the same time there are so many different types of mortgages and home loans available nowadays. Often borrowers are confused and overwhelmed by the choices available and the more stringent lending criteria. In this environment it is where the finance and mortgage brokers really are worth using. Their experience and knowledge of the banking processes and the best way to gather and present information and documentation to support a loan refinance application is well worth it. The lenders pay them a fee so there is not cost to you the borrower. If i was going to refinance my home loan today i would definitely go with an experienced broker.
If you are looking to refinance your property and require a local finance broker, HVG have associated re finance specialist in all the following areas : Adelaide, Ballarat, Bendigo, Brisbane , Cairns, Canberra, Central Coast , Darwin, Geelong, Gold Coast, Hobart, Launceston, Newcastle, Melbourne , Perth, Sunshine Coast, Sydney, Townsville, Toowoomba, Woolloongong.