How to Refinance a Home Loan

With interest rates at record low levels, there has never been a better time to look at refinancing your current home loan.

If your current lender is not prepared to give you a better deal (i.e., rate reduction), then it might be well worth taking the time to speak with a mortgage broker to find a lender that will.

Here’s how to refinance your current home loan.

Assess the cost of your current home loan

One of the most important factors in any mortgage are the costs involved. The largest cost is normally the interest rate that is attached to the home loan.

If you don’t know what interest rate you’re currently paying, it should be listed on the statement. Otherwise, you can contact the lender directly.

It’s also worth noting the other costs that are involved, such as any annual fees and charges. At the same time, you will also need to consider the impact of other loan features, such as an offset account, because it could be saving you quite a bit of money.

Ask your current lender for a better deal

If you’ve been with your lender for a reasonable length of time, they might potentially drop the interest if you simply ask.

No lender wants to lose a customer, so if they can bring their rate down slightly, it could be a win-win situation for both of you.

It is worth noting that the interest rate is only one element of a good home loan product, so make sure you also take additional features into consideration.

Find out how much it will cost to exit your current loan

When it comes to refinancing, it’s not always just about how much money you are likely to save. Some home loans can come with significant termination costs, and that is something you need to know well in advance.

The most common trap is if you are on a fixed rate home loan, in which case there could be costs that run into the thousands, if you want to change the deal.

Compare home loans

As mentioned, refinancing isn’t all about the interest rate. You can also refinance if you want to cash out some equity, improve the terms of the loan, get improved loan features, or consolidate debt.

It’s worth considering your own financial situation here as well. If you were in a high-paying, full-time position whenyou took out your home loan the first time, refinancing might not be possible if you’re now out of work.

If you are simply looking at interest rates, don’t get fooled by very low introductory rates, as they will generally adjust upwards after a certain period of time.

It is worth consulting your mortgage broker, who is the best person to be comparing your needs with the current home loan market.

Look at the costs of changing lenders

While there might be costs that come with exiting your old loan, there will almost certainly be fees involved in applying for a new home loan.

There are also other considerations, such as the costs involved in getting a bank valuation.

Some lenders might offer a refinance cashback, but it’s worth assuming that there will be things like application fees and valuations involved.

Apply for a new home loan

By this stage, you should have a few good ideas about the lender you want to go with, the type of loan you are looking for and also the likelihood of it being approved.

Your mortgage broker is the one who can handle all of this for you, and the fact that they normally have very close relationships with lenders means that they can get you matched with the right product.

They will also have a good overview of your creditworthiness well in advance and ensure that you only apply to a lender where your chances of getting approved are very high.

*This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. Credit Representative (523208 ) is authorised under Australian Credit Licence (384324).