With a record-low official cash rate lingering, now may be the time to refinance to a better deal so here’s an overview of what’s involved to get you started.
With the RBA keeping the official cash rate at its record low of just 2.5% for over 12 months now and lenders being increasingly competitive to win your business, borrowers are in a strong position.
Now may be the time to review your home loan to ensure you’re maximising the market. While it might sound daunting it doesn’t have to be, so here are some key things to know.
What is refinancing?
Refinancing involves replacing your home loan with a new mortgage that (ideally!) gives you a better deal, whether through a lower interest rate or different loan features that you want. Your original loan is paid out by your new one, and the balance transferred.
What’s involved in refinancing?
When you refinance you’re applying for a new loan, so you need to go through a similar process to when you got your first mortgage. Application, approval and settlement are all involved in refinancing.
What do I need to do before refinancing?
· Know what you’re getting: Make sure you know your current interest rate, what you still owe on your loan, your property’s value, what loan features you need, and any fees such as mortgage discharge or exit fees if they apply.
· Compare the market: Find out if there’s a better deal by researching other loans and lenders. A mortgage broker can also help you do this, and they’ll be able to ensure you’re comparing apples with apples.
· Prepare for valuation: Just as your lender values your property when you first get your mortgage, your new lender will also need to value your property so make sure you’re prepared to maximise your valuation.
· Paperwork: You’ll need to re-do all the paperwork and show proof of income, outgoings, etc so gather up your pay statements, bank statements, credit card statements, tax certificates, proof of ID etc as these will all be needed if you go ahead.
· It takes time: While every lender is different, it can take some time to discharge a mortgage. Just make sure you allow ample time for the process to be completed by both your current and new lender.
While refinancing is intended to save you money, there can be some costs to refinancing so make sure you do your sums to work out whether you’ll be better off in the long term.
The best part about refinancing is that you don’t have to do it alone. A mortgage broker can manage the process for you, from comparing other lenders and loans to completing the paperwork all the way through to settlement.
Find out more about refinancing by downloading Aussie’s free Home Loan Refinancing Guide.
Have you recently refinancing your loan? What do you think is important to know before going through with it?
If you found this article useful please share it using the buttons below.