How refinancing ‘made a big difference’ for this single mum

Refinancing could help you reduce the amount you pay on your home loan, a reality for an Aussie mum

09 September 2021|3 minute read

single mum

Raising children as a single mum is no easy matter. Throw in a home loan with a high rate and the challenge becomes even harder.

Joanne Miller decided to enter the property market and became a homeowner.

Her loan had a rate of 5.84%, but with only a part-time job plenty of lenders knocked her back due to her financial situation.

That all changed when Miller landed full-time employment. Hopeful that she would be in a better position to minimise the cost of her repayments she reached out to her local Aussie Broker.

"It’s made a big difference”

“With teenage boys and a full-time job, I didn’t have time to visit different banks, my Aussie Broker came over to my place for a meeting after work, and we talked through my loan options,” said Miller.

When her broker explained that she would qualify for a loan with a rate of 3.59%, a huge weight was lifted from her shoulders.

“Refinancing my home loan has cut $525 from my monthly repayments – that’s a saving of $6,300 each year,” said Miller.

“It’s made a big difference to me and my kids,” she added.Even better, the whole process of refinancing turned out to be very straightforward.

“Actually my broker did all the work for me,” recalls Miller.

“He filled out the loan application and dropped it into work when the paperwork was ready to be signed. It was a lot easier than if I had tried to do it myself.”

Miller's advice to anyone thinking of refinancing?

“It’s really important to find someone you click with, I really built a sense of trust with my Aussie Broker. He made everything so easy and that’s what we all want in life.”

What’s involved with refinancing?

The process of switching to a new loan may sound like a hassle but it can actually be surprisingly easy, especially with your Aussie Broker on your side to help you find your new loan and then handle the paperwork on your behalf. 

First up, it’s worth pointing out that when it comes to choosing ‘the best home loan’ there is no one-size-fits-all solution. It’s a matter of finding the right loan for your particular needs. 

That’s why your Aussie Broker takes the time to understand your goals and circumstances.  

Having selected the loan that matches your needs, your Aussie Broker will assist with applying for your new home loan. This part of the process works in much the same way as when you applied for your current loan. 

While there’s no need to provide evidence of savings, you’ll still need to stump up some personal ID (passport, driver’s license), plus evidence of your income (usually a few recent payslips), expenses and any other loans, such as credit cards, you might have. 

Refinancing your mortgage to take advantage of beneficial rates or features can save you money in the long term, but you need to weigh up the short-term costs before making a decision.

Some fees and charges apply when refinancing:

As a guide there are always costs to consider when refinancing your mortgage, but the benefits can include freeing up your cashflow, lowering your mortgage repayments, and greater financial flexibility.

Borrowing costs

What are borrowing costs and how does it apply to you?

When you refinance, your new lender may charge a range of upfront fees (see below). 

Not all lenders charge all of these fees, and some may be willing to negotiate or waive some costs like application fees (your broker can help you with this).

Some lenders also offer ‘cash back’ incentives when you switch your mortgage to them, which could offset some or all of the costs of refinancing.

  • Loan application fee – a fee imposed when you apply for a loan 
  • Valuation fee – the lender may impose a fee to have your property professionally valued 
  • Settlement fee – your lender may charge a fee for the payout of your current mortgage

Lender’s Mortgage Insurance (LMI)

It’s important to remember that Lender’s Mortgage Insurance protects the lender, not the borrower, should the loan default.

If you refinance to access equity and your loan-to-value ratio (LVR) jumps over 80 and you may be asked to take out LMI. 

Borrowers can pay this as a one-off premium, or capitalise it (that is, add it to the amount you’re borrowing) but this means you’ll be paying interest on it, which will add to its overall cost in the long term.  

Do I have to pay Exit fees?

Exit fees on new loans were abolished by the Federal Parliament from 1 July 2011.

If you took out your loan after that date, then you don’t have to worry about exit fees. 

But if your loan pre-dates the change, then you should check what fees – which can go by different names, like ‘early repayment fees’ or ‘deferred establishment fees’ – you’re liable to pay. 

Do I have to pay a Break fee?

If you are on a fixed rate loan and you wish to switch to another home loan product, interest rate, or payment type during your fixed-rate period your lender may inform you that you are required to pay a break fee. 

While having a fixed rate may protect you from volatile rate changes each month, it may be challenging and costly to change your loan if you want to refinance.

Break costs are typically calculated based on the time remaining in the fixed term.

If you are thinking about making an advance payment during your fixed-rate period, or would like clarification on how much breaking your fixed rate might cost, contact your local Aussie broker today to help you better understand the costs involved.

Stamp duty and fees

Stamp duty could be applicable in a refinance if you are adding someone onto the title outside a married/defacto scenario.

To learn more on how to refinance your home loan, how to consolidate your debt, get a better interest rate, or even look at an offset account / redraw facility, talk to an Aussie broker near you. Depending on the lending criteria they may be able to assist you with your current financial situation.

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