Great Southern Bank Head of Product, Barbara O’Conor-Nash says, “We find customers refinance for many different reasons. The most common reason is to reduce their home loan interest rate and in turn reduce their monthly repayments. If you’re looking to refinance it’s important to weigh up the costs to refinance versus the amount you will save each month.” Here’s a quick guide on how to refinance your home loan.
Review your current home loan
Before you start researching other home loans, you should probably reacquaint yourself with your current home loan. It’s good to know what the existing interest rate and monthly repayments are first. You’ll then know how much you could be saving when compared to other home loans. It’s also worth understanding why you’re looking to refinance your home loan.
Know why you want to refinance
Life can be full of twists and turns – just look at the last 18 months for example. Job changes, promotions and new family arrivals are just a few of the things that can bring about change. So, it makes sense to have a home loan that suits what’s going on in your life.
What you needed from your home loan when you first took it out may have changed. Whether you’re looking for more certainty with your repayments, to save some money on interest, or just want the flexibility to pay off your home loan sooner, refinancing may help you get what you need from your home loan.
O’Conor-Nash says, “Our lives are always changing, and as your life changes the type of home loan you need may also change. You may be looking for a home loan with more features such as an offset account to help you pay off your loan sooner, a lower interest rate to free up some additional money each month, or simply increase your home loan to complete some renovations. Refinancing can help with each of these.”
When is the best time to refinance?
You can pretty much refinance your loan at any stage, but it’s really important to investigate and weigh up the costs to refinance. Having said that, it’s helpful to have at least 20% equity, as you may have to pay Lenders’ Mortgage Insurance on the new loan, if you have less equity than this. If you don’t, that’s ok, it can be added to the cost to refinance.
What are the costs to refinance a home loan?
The most common fees and charges are discharge fees to release your mortgage from your current lender, government fees to register your mortgage with your new lender, and early payout or break costs if you’re in a fixed rate home loan. There may also be application/establishment fees to set up your new loan. Ask your lender for help understanding the fees involved. Then, compare the costs to refinance against the savings to be made.
What are the advantages of refinancing?
Refinancing your home loan offers some great advantages. The most obvious is that it could get you a lower interest rate than your current loan and lower your monthly repayments. Mind you, if you maintain your current repayment levels while the new minimum required repayment is lower, you could pay off your home loan much sooner.
Refinancing could also provide more flexibility with home loan features that better suit your needs. If you need to offset or redraw you can choose a loan that offers that particular feature. Another great benefit of refinancing is that you can access any additional equity in your property to complete renovations, invest in another property or even buy a car.