Refinancing your home loan is a magnificent way to obtain better rates and potentially save more money in the long run. By reviewing your home loan every few years, you could be ahead of the game! In addition, refinancing a mortgage is a financially intelligent thing to do, as your current loan may not always be your best option.
You see, people refinance for all kinds of reasons:
- Saving on costs;
- Saving on interest rates long term;
- Better protection of money;
- Establishing a simpler, uncomplicated way of life;
and so much more.
So, now that you see how it can help you and how it may better your current situation, here are the most commonly asked questions about refinancing:
- Why should I refinance a home loan?
- How do I refinance a home loan?
- Does it cost money out of pocket to refinance?
- How can I calculate home loan interest?
- Can you refinance a home loan within the same bank your current loan is with?
- How often can I refinance my home loan?
Ready to have these questions answered and explore your options? Then read on!
Q1. Why should I refinance a home loan?
There are many reasons why refinancing is a great idea and why so many homeowners do it all the time.
For example, you may:
- Want to find a better interest rate.
- Want to borrow more money for other costs (e.g. a car loan, credit card etc).
- Want additional benefits (e.g. an offset account, health insurance, cashback etc).
- Be after better borrowing power (by consolidating your current debts).
- Want better customer service.
The above are just a few reasons why homeowners refinance. I also encourage you to consider why you want to refinance, as understanding your goals will help you find the perfect loan.
Q2. How do I refinance a home loan?
First and foremost, you must review your current loan and ask yourself the following questions:
- What are your repayments like?
- How long do you have left on your loan?
- Does it have a fixed or variable rate?
- What could it cost you (in fees etc) if you left your current lender?
- Is it actually a good idea to refinance now? What is the market doing?
Once you’ve figured out your situation, the next step is to explore your options and rates with different lenders. Remember that some lenders charge higher fees than others, so check out the conditions, fees and ongoing costs you may need to pay. You don’t want to be hit with a nasty surprise!
Note: If you find a new lender with a better rate, first negotiate with your current lender before switching, as they may offer better terms.
Q3. Does it cost money out of pocket to refinance?
Long story short, yes. Never forget that there are many potential fees that you might be charged when refinancing. These can look like:
- Lender’s mortgage insurance fees;
- Application or condition fees for the new home loan;
- Break costs or exit fees;
- If refinancing to afford a second property, you may need to pay stamp duty;
and possibly a bit more, so keep an eye out.
Don’t forget, refinancing still comes with many pros!
Q4. How can I calculate home loan interest?
By simply using home loan calculators online or speaking to a mortgage broker!
Check out our calculators that may help you do just that.
Q5. Can you refinance a home loan within the same bank your current loan is with?
The short answer is yes, as doing so means you are taking advantage of your relationship with this lender, who could provide a quicker turnaround in the application process.
If you are genuinely happy with your current lender, you can chat with them about refinancing, and they may be prepared to offer you a better package or interest rate. The advantage package will depend on the bank but can include many benefits!
You’ll never know if you never ask.
Q6. How often can I refinance my home loan?
Technically, there is no cap, but industry specialists recommend a refinance every four years to keep on top of interest rates and potentially obtain better packages or benefits. In saying this, it is entirely up to you and your situation as to when or whether or not you refinance. After all, if you are happy with your current home loan, there’s no real point in switching it up!
At the end of the day
Now that you know the basic ins and outs of refinancing, it’s up to you whether you take the next step and refinance. Only you know whether this is worth doing for you and your current situation!
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