Refinancing your home loan is something you should consider whenever your financial situation or market conditions change. If you’re thinking about refinancing, below is a 5-step process for how to do it.
Step 1: Research the market
This is crucial. You need to find a better deal than you have now. You don’t have to refinance with your current lender.
Unfortunately it can be confusing and time-consuming to research the market because there are so many lenders and products out there. If you don’t know much about finance, getting a licensed mortgage broker to do it for you can save you a lot of time and hassle.
Step 2: Do a cost-benefit analysis
It’s important to understand that there are costs associated with refinancing. The benefits of refinancing need to outweigh the costs for refinancing to be worthwhile.
Refinancing costs can include:
- break fees if you want to get out of a fixed interest home loan early.
- discharge fees on variable rate loans.
- new loan application and/or ongoing fees.
- government charges.
- home valuation fees on your refinanced loan.
- lenders’ mortgage insurance (LMI) if you want to borrow more than 80% of your home’s value.
Refinancing benefits can include:
- lowering your monthly repayments.
You can do this by finding a loan with a lower interest rate or extending your loan term.
- accessing the ownership (equity) that you’ve built up in your home.
You can use this extra finance for different purposes, like a renovation or as a deposit on an investment property.
- consolidating high-interest debts.
Home loans are a cheap source of finance. You can consolidate any higher interest debt you have (like credit cards debt or personal loans) into your lower interest home loan. This will save you on interest charges.
Step 3: Negotiate with lenders
If you have a good credit score, you should be able to negotiate the best possible terms and conditions for your refinanced loan. Try negotiating with your current lender first. If you have a record of making your repayments on time, they won’t want to lose you. They might offer you a better deal.
But if they don’t give you a good offer, see what their competitors are prepared to do. And if you don’t feel comfortable negotiating, get a licensed mortgage broker to do it for you. They negotiate with lenders for a living.
Step 4: Apply for your loan
If you (or your mortgage broker) find a good deal and the benefits outweigh the costs, apply for your home loan refinancing.
Step 5: Exit your existing loan
Once your refinanced loan is approved, you need to exit your existing home loan. If you are refinancing with another lender, they will likely arrange this for you.
How we can help
At Wisebuy Investment Group in Newcastle, our licensed and experienced mortgage brokers can help you to refinance your home loan. And best of all, our service is free!
Contact us today for an obligation-free chat to find out more. We’d love to hear from you!