Paying too much on your home loan?
Refinancing your home loan can yield you thousands of dollars in savings every year. It can also help you pay off your mortgage years earlier, in some cases. Although this may seem difficult and complicated, we will work by your side every step of the way to make this seamless and easy for you.
There are many reasons to go through with a refinance. The economy may be experiencing a downturn which could provide an opportunity to lock into a fixed loan at a low interest rate or to help reduce your monthly repayments with an extended loan term at a new lender.
When you can get a much lower interest rate – generally a minimum of 20 points (0.20%) reduction, it could be worth it. Depending on your total debt level, interest rates reduction, even though incremental, could make a substantial difference. More importantly than the rate is the amount of actual interest savings per month, per year and over the short term of 3-5 years.
Be careful of:
You would benefit from changing the terms or adding additional features; switching from variable to fixed home loans could mean more certainty on your repayments and securing a much more competitive rate. Particularly if you are not planning on making any major financial changes to your position, a fixed rate could be more suitable, secure and more competitive in the cost.
When looking for a refinance, it is important to carefully evaluate on what options and features you want when you are switching over to a new lender.
Speak with a mortgage broker to save yourself the hassle from doing the legwork yourself. Brokers usually have 20+ banks or lenders they work with to find you the best refinancing option that suits you.
Consider the total fees applicable and all conditions of the loan. Refinancing is similar to applying for a new mortgage, make sure you have all the necessary documents ready to go for the assessment process.
Refinances on your mortgage can be completed within 5-9 days (assuming no delays occur). The new bank will pay off your mortgage in full
Refinancing Costs and Tax
1. Exit fees & break costs: If you have taken a fixed home loan, you are highly likely to incur a ‘break’or ‘exit’ fee. When taking out a fixed rate home loan, you agree to lock in a certain interest rate for a defined period of time. Therefore, you have the certainty of knowing that the rate will not change in this duration and that you know the exact repayment amounts. if interest rates change during that period, your repayments and interest rate will not change. In return, you have limited flexibility to make changes during the fixed period.
2. Government charges (discharge and mortgage registration): To update the States Titles now that you have changed your lender or bank, there is a discharge and registration cost. Depending on the state or territory you are in, this fee ranges from $110-$400. (See below for government charges in your state).
Application fees: Sometimes referred to as an application or upfront fee which is a one-off payment to set up your new loan facility. This does not always apply and will depend on the bank you proceed with. Depending on your occupation, you could also qualify for a waiver if a fee is applicable.
Valuation fees: The lender may require a valuation on your property to identify the current market value. This fee depends on the particular bank and various banks do not charge any fees for this or may not even require one to be done.
Lenders mortgage insurance (LMI): In the event that your home loan debt is worth more than 80% of your property value, LMI (one-off cost) is usually added to your loan. The amount will depend on the exact debt level, total loan-to-value ratio and other factors including the location of your property. When LMI is applicable, we usually raise some caution to proceed and understand the exact savings that will be made when making such a change as LMI could be thousands of dollars.