Start on the path to a better home loan with our expert tips and advice on refinancing.
Sorting out mortgages can be a bit of a headache. There’s plenty of paperwork involved and revisiting that can be somewhere you’d rather not go. But reviewing your goals and what the mortgage market has to offer, can be well worth the effort. By getting an insider’s view on your options, it can speed up the refinancing process, making it a lot easier to deliver the right result.
The broker effect
When it comes to comparing lenders and their products, there’s a lot to consider. Not only are there thousands of loans to choose from, you’ll also need to understand which ones are right for your circumstances. And that’s why it can often make sense to get a broker’s help with narrowing down your refinancing options.
“A good broker really knows what’s out there,” says Aussie broker Robert Hodson. “They can compare offerings from a wide panel of lenders, all presented in clear and simple terms so you’ll really understand what you’re getting. And given what you want to achieve, you can select the top competitive options, saving on your refinancing costs as well as interest.”
According to Hodson, many people looking to refinance just want to enjoy the benefits of a lower rate. They’re aiming to save on their repayments to boost their cash flow or pay off their loan faster. But other homeowners have different goals in mind, like consolidating debt or investing in property.
“For people looking for a way to pay off expensive debt from personal loans or credit cards, refinancing with a basic mortgage at the lowest available rate is really going to save them a lot,” says Hodson. “Releasing equity to invest in property is more complex. You’ll want to have the right type of loan and keep costs as low as possible by avoiding Lenders Mortgage Insurance (LMI). It takes more planning and discussion to make it work, but it offers great potential for building your wealth.”
Another refinancing goal owners often have is helping children or siblings buy their first property.
“With a family pledge or guarantee based on equity in a property, a first-time buyer can sometimes borrow as much as 100 per cent of the purchase price plus stamp duty and avoid LMI,” says Hodson. “But some lenders don’t offer this type of loan or they’ll have a lot of hoops you have to jump through. It makes sense to refinance with a lender who makes it easy to get approval.”
Although “what’s the best rate?” is often the number one question Hodson is asked by refinancers, he’ll always encourage home owners to think carefully about their future plans and get a new loan deal that brings benefits for years to come. After all, there are costs involved in refinancing and it can take a while for interest savings to compensate for these.
“It’s important to think broader than just saving on your rate,” says Hodson. “If you’re even thinking about using your equity in the future – for your kids or for investing – it’s important to refinance with that in mind. You’ll save more in the long term and set yourself up with loan features you can use to your advantage.”
What’s motivating you to refinance your home loan? Share your goals in the comments below.