Do you remember the first instance when you took out your first home loan?
It was a tiresome process, spent in researching a number of loan options so that you could secure a mortgage that best suited your needs and pocket.
So, now that you have secured it and bought the home of your dreams, it makes a good financial sense to keep reviewing your home loan at least annually. This will ensure that it is still meeting your needs and providing you with the features or interest rate which had attracted you in the first place.
Everything changes and with time you might realize that your loan no longer offers the same features and flexibility that you once had. This might be one of the reasons why you might think of refinancing.
Hence, here are some things that you need to know to understand what is involved in refinancing your home loan so that you can decide whether it is the right step for you.
Refinancing can aid you in achieving important financial and personal goals. So, let us have a look at some of the most common reasons for refinancing a home loan.
Before you go ahead and refinance you need to be aware of the steps involved in the process. Here is what you need to know. When you are to get refinanced, you first need to determine your ‘borrowing capacity.’ Here are some factors that will determine your borrowing capacity.
To help you with determining your borrowing power, you can always use the Borrowing Calculator and see how much you may be able to borrow.
If you decide to opt for refinancing, you should have your paperwork ready with you before you start talking with lenders. This can help you to speed up loan approval. The paperwork that you may require are:
Refinancing does not only save you money, but it also has costs involved. This is why you should sensibly weigh all the pros and cons. This means comparing the costs to benefits , ensuring that it really is the right move for you. Some of the key costs that you might face when refinancing are:
Your lender might or might not charge you a range of upfront fees when you refinance. However, in case he/she does, here are the most common fees as listed below.
Remember that you may be asked to pay an LMI if you ask to refinance for 80% or more of your current homes. LMI is an insurance that protects the lender if you are unable to meet your home loan repayments.
If, at present, you own a fixed rate loan, then check if you owe breaks costs. For knowing this you can call your lender, who will be able to tell you whether break costs apply and what you are likely to be charged.
These fees are applicable when you choose to switch from one home loan to another. This will let the State Titles Office know you have changed either your lender or the type of loan. Mortgage Registration fees vary according to your State or Territory. You can take the help of the Stamp Duty Calculator to know about the mortgage transfer fees that apply to your area.
There are no strict rules about the time when you should refinance your loan. However, financially it makes sense to review your home loan at least once a year or when your circumstances have changed.
Whatever your circumstances, a free appointment with an expert mortgage broker will enable you to know whether you can benefit from refinancing. It will cost you nothing and could save you thousands through improved loan features or a reduced interest rate. All the points mentioned above will help you know what you need to about refinancing.
Choose well, enjoy a free financial life.