Refinancing your home loan
Lisa Montgomery, Resi Home Loans, takes a look into refinancing your home loan.
What are the main reasons to refinance your home loan?
Lisa takes a look at everything from saving on interest rates to debt consolidation. Covering topics such as exit fees, improved loan features, and making your repayments more affordable, this guide is everything that you need to help you with your refinance.
Video transcript below:
Lisa Montgomery, CEO, Resi Homeloans
Lisa Montgomery: Hi, I’m Lisa Montgomery, CEO of Resi Homeloans. So you are wondering if refinancing your home loan is right for you. Well the principles behind refinancing are simple.
The usual motivation is to get a better deal in terms of interest rate, fees and overall experience. Perhaps you are looking for more affordable repayments. Or to pay your loan off sooner.
Whatever the reason if you are considering moving your loan from one lender to another, you need to make sure that your next home loan ticks all the boxes.
- Better Deal
- Affordable Repayments
- Pay Loan Sooner
It needs to be right loan for you now and the future, taking into consideration your changing circumstances. After all you don’t want to be going through this process again in the short term.
Do Your Homework
Finding that new lender, the right lender for you involves research so do your homework and for my money the best research is the research you do yourself. To begin with, you need to identify what works for you with your current loan and what improvements you want to make. We are all very individual when it comes to what works for us financially. Friends and family are always quick to tell us what works for them. But it may not be the right deal for you. So take a closer look at your home loan, put it through its paces and make sure you get the loan that suits you.
Save on Interest
But firstly why refinance? Well more often than not, it’s to save money on interest. Interest rate is often the number one reason borrowers refinance. Particularly these days, because many of us are highly leveraged in terms of the amount we owe. If this is the only reason you are looking to refinance then it’s a good idea to approach your current lender to see if there is anything they can do to help, it may save you time and energy. Identifying a better rate will come from research in the market. But remember this is only part of the equation. You may have the lowest rate in the market, but if the rest of the package is costly or inflexible, it may not be best deal for you.
Getting a better overall deal
Getting a better overall deal. Getting the right home loan to help you achieve your goal should be a priority. But first you need to set those goals and match the loan to help you reach them.
Apart from interest rate, some other things you may need to consider include:
- Low Fees: low or no monthly or annual fees.
- Loan Features: The right features. Some loans come with redraw, offset account, line of credit and online access. Depending on how you operate your loan and indeed the purpose, would determine what features you need.
- Flexibility: The right amount of flexibility. Well additional and lumpsum repayments are a must for any variable loan arrangement. Access to move to a fixed rate or interest only payment option can also be useful.
Other reasons to refinance can include preparing for immediate or future projects. For example: Home Renovations
Renovating your home, it’s common practice to combine the need for additional funds to renovate your home with the renovation of your home loan.
Creating wealth through investment property. Accessing the equity in your home to purchase an investment property can be a great way to build wealth over the longer term. If this is part of your financial future, it’s important to structure your new loan arrangement effectively and efficiently.
Changing circumstances. Whole life is full of change. For example starting a family, a significant pay increase or the loss of an income temporarily can prompt a review of your financial situation and perhaps the refinance of your loan.
Consolidating Your Debt
Consolidating your debt. When credit cards, car loans or personal loans get out of hand, consolidating all debts into your home loan can help you pay those debts off sooner. However, rolling short term debt into long term debt can mean you pay more over time. So make sure you structure your repayments appropriately to maximise the benefit and remember don’t fall into the trap of letting short term debt get out of control all over again.
Quality service and guidance. A quality lending professional can make all the difference when it comes to saving you money on interest and paying that loan off sooner. Look for a lender you can have an ongoing relationship with. One who will look for ways to structure your finances according to your goals and provide you with strategies to achieve them.
Exit Fees: But before you do anything relating to refinancing, you need to understand whether there will be any costs involved in exiting your current loan arrangement. This cost will be determined by how long you have had your current loan and the type of facility you have. So please ask that question first.
Establishment Fees: There will also be costs involved in establishing the new loan and these could vary from lender to lender.
Whatever you do, remember that when choosing your next home loan, you need to ensure it ticks all the boxes in relation to interest rate, fees, flexibility and of course service. Don’t work hard for your home loan. Let your new lender and your new loan do the work for you.
Thanks for watching. I hope you found this helpful. For more information or if we can assist you in refinancing your home loan, call Resi on 136 126 or visit resi.com.au.