Refinancing can assist us in achieving important goals. The present mortgage market is competitive with brand new types of loan features and packages available almost everywhere. Furthermore, loan interest rates vary widely too, making your current loan look old, as it does not offers features and flexibility that you really need. All these circumstances make it worth thinking about refinancing. Other reasons why you might want to refinance are as follows.
The process involved in refinancing a loan is very much similar to applying for a home loan. Generally, these steps are followed for refinancing a loan:
You need to research the costs, fees, and penalties that you may need to pay to your existing lender such as Deferred Establishment fees (DEF) in case you choose a different lender.
Analyze your needs for refinancing an existing loan. Is it because of the consolidations of debts or are you looking for lower interest rates? Do you require cash flow during emergency or are you just willing to switch to a different lender?
Write down your basic needs and features you want to enjoy and choose a loan that fits all or most of the features. Allow us to help you in choosing the right type of loan according to your requirements.
After you have decided your loan type, you will need to provide the following documents :
- Recent pay slips
- Documents of your existing loans
- Your latest council rates notice
- Evidence of the building insurance policy
The lender will evaluate your property and estimate the value of your current property, which is often changeable.
After valuation. The new lender will formally approve your loan and will instruct a solicitor to prepare the loan documents on their behalf and signed by you.
After all this, your new lender will settle your previous loan with previous lender so that new loan can be established.
Loan features available with refinancing
Refinancing your home loan may offer you some additional features such as:
- Flexibility with repayments and extra payments to pay off the loan faster
- Loan portability when shifting to a new home
- Interest rate options like interest only loan or split loans
- Rest from repayments with repayment holidays
- Redraw facility to get cash during emergencies
- Offset account to decrease monthly interest and repayments
Additional costs associated
Refinancing can save you money but there are additional costs involved. Note that all of these may not apply to your needs and for the actual cost of refinancing. Talk to a financial expert at Credit Hub Australia.
Exit fees is applicable only when you are able to pay off your loan early which is usually within a period of 3 to 5 years. It could be a percentage of your remaining principal or a fixed amount.
At the time of refinancing, your new lender may charge a range of upfront fee such as:
- Loan application fee
- Valuation fee for a professional appraiser
- Settlement fee
Lenders Mortgage Insurance (LMI)
LMI is a type of loan to secure the lender if loan repayments are not met from your side. LMI will be asked to pay if you are borrowing 80% or more of your home’s value. LMI is also a non-transferable payment which simply means that if you refinance, you will have to pay the LMI again.
Stamp duty is a tax charged on your mortgage by the state government and it is calculated on your loan amount. The stamp duty may be applicable in case refinancing increases the size of your loan.
Mortgage Registration Fees
Mortgage registration fees is imposed by the land title’s office when you register your mortgage onto the title record for the property.