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  • Writer's pictureMichael Smith

How to Refinance Your Home Loan

If you’re new to refinancing, or unfamiliar with the concept, you may want to pay particular attention if you own a property. You see, refinancing your home loan allows you to change the key terms of the loan to meet your needs, or take advantage of certain benefits brought about by changes in the market.

After all, your current home loan may have been the best option at the time you bought your home, but things change. And with that, it often makes sense to revisit your options as a better deal might exist. Of course, your Growthfront mortgage broker can work with you to see whether your home loan still stacks up, or if you could do better by refinancing your home loan.


How does Home Loan Refinancing Work?

When you refinance your home loan, you are actually paying off your existing loan and taking out a new loan. In many cases, the new loan may be with a different bank or lender. Alternatively, you might opt to stay with your current lender, albeit under a different loan.

You don’t actually have to pay off the remainder of the loan physically. That is, the money won’t be coming out of your pocket. Either your current lender will set you up under a new loan that carries your existing balance, or a new lender will pay out the remainder of your current home loan on your behalf as part of the refinancing process.


Why Refinance Your Home Loan?

Most people who think about refinancing their home loan either do it for specific reasons, or out of convenience. It is ultimately a personal decision as it will depend on the current home loan you currently have, as well as what you might be able to obtain in the open market.

Some of the reasons you might refinance your home loan include:

  • Transferring to a better interest rate to reduce monthly repayments

  • Switching from a variable rate loan to fixed rate for more security and visibility

  • New or improved loan features (e.g. offset account, redraw facility, flexibility to repay the loan faster)

  • Leverage equity in the home to provide funding for renovations, home upgrades, or even to fund an investment property

  • Consolidating other debts (e.g. credit cards, personal loans) into your home loan at a lower interest rate

  • Generous cashback offers that otherwise accompany the same, or better, loan terms


Home Loan Refinancing Considerations

When interest rates are changing on a frequent basis, it pays to look closely at your current home loan. If you’re on a variable rate loan, every rate hike means you need to pay more as part of your monthly repayments.

This is why a number of borrowers often choose to switch to a fixed rate loan when rates are increasing, as it makes it easier to budget knowing your monthly repayments will stay the same for a certain period of time.

Keep in mind, however, refinancing your home loan is a decision that should not be taken lightly. Yes, there may be benefits, and our team of mortgage brokers can help you weigh up these factors, but you should also be aware that refinancing your home loan may come with a high cost, which we’ll discuss below.

Furthermore, if you decide to increase the size of your loan when you refinance it, you may need to pay government expenses again like stamp duty, and a mortgage registration fee.


How to Refinance Your Home Loan

The process to refinance your home loan is time-consuming, and this is why it makes a lot of sense to hire a mortgage broker like Growthfront to streamline the process and find the best deal. As such, all you need to do is reach out and we’ll discuss your options with you.

We’ll begin by reviewing your existing loan, your motives for refinancing, and then assess thousands of loans in the market. We might find that your current loan is still competitive, or even the best for your particular needs, or we may find better options in the market. You can refinance your loan at any stage, just be aware of the potential costs.

Refinancing your home loan takes about the same amount of time as your original loan application as the process is largely the same. You will need to submit a refinance application and await approval.

On average, you are looking at a turnaround time of about 4-8 weeks, although sometimes this may be sped up if your lender follows a practice where your title insurance is used to pay off your home loan. Once approved, you will have a new settlement date based on the refinancing.

In addition to government expenses, your current lender might impose an exit fee for paying off your existing loan early - this applies to loans taken out before July, 2011 - or they might impose break fees for exiting a fixed rate loan.

On the other hand, your new lender might charge upfront costs like a loan application fee, settlement fee for your current loan, or a valuation fee to have your property valued. You may even need to pay lender’s mortgage insurance (LMI) again if you refinance over 80% of the value of the property since this fee does not transfer between lenders.

Make sure you weigh up all the costs involved with refinancing your home loan, as the additional expenses could offset any potential savings over time.


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