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refinancing

The Ins and Outs of Refinancing Your Home Loan

In today's competitive home lending market, refinancing is so much easier than it has been in the past.

There are many good reasons to consider refinancing. Here is a list of reasons why you may be considering the refinancing of your loan.

$ you are not happy with the service from your current lender

$ you are paying a higher interest rate than is readily available today

$ you would like a loan with reduced or added features

$ your financial circumstances have changed

$ you are paying too much in bank fees

$ you have started a new job

If you can relate to any of these situations, you are a candidate for refinancing your mortgage.

Who can benefit from refinancing?

Refinancing does not make good financial sense for everyone. As there are costs involved in refinancing – a quick calculation of the costs involved versus the savings achieved needs to be considered.

This is easily done by applying the interest rate differential to the loan amount. If the figure is greater than the costs involved –then it would be worthwhile considering.

E.g. You have a $450K home loan and are paying 8%.

You've heard that people are getting rates now of 7.3%.

So the difference is 0.7%.

0.7% times $450K is a savings of $3150 per year. If the costs are less, you are ahead in the first year.

Many states in Australia , now provide concessions / exemptions to mortgage duty which now makes the case for refinancing even more attractive.

At barrett lending solutions we go through all the calculations with you, working out the best solution for your specific needs.

How healthy is your current loan?

Compared to some of the new loans and lower rates on the market, you may currently have a home loan that is not in the best shape.

barrett lending solutions can help you assess your existing loan. Think of it like a loan health check.

We help you determine whether your existing loan has fancy features that you don't use. These features bump up the cost of the loan - so if they are sitting idle, it is money down the drain.

What's involved in refinancing?

If you refinance your mortgage, the process will be similar to what you went through in obtaining your original mortgage. You will encounter many of the same procedures and some of the same types of costs the second time around.

TIP

TIP: If we decide that refinancing is not worth the costs, will ask your current lender whether you may be able to obtain all or some of the new terms you want by agreeing to a modification of your existing loan instead of a refinancing.

 

How to determine your refinancing costs

When you refinance your mortgage, you usually pay off your original mortgage amount and sign a new loan. With the new loan, you again pay most of the same costs you paid to get your original mortgage, including application fees, settlement costs, and other fees. You may also be charged a penalty for paying off your original loan early, called a prepayment penalty.

Prepayment Penalty. A prepayment penalty on your present mortgage could be the greatest deterrent to refinancing. The practice of charging money for an early pay-off of the existing mortgage loan varies by lender and product. The mortgage documents for your existing loan will state if there is a penalty for prepayment.

The cost of refinancing depends on your existing lender's exit fees, and the establishment fees imposed by the new lender. You should check with your current lender what it would cost to pay out your loan early. Then it is a matter of weighing up how much you will save over the course of the loan.

If you find the right loan, you will save with a better value deal over the course of your loan. And the money you save can be invested elsewhere.

When to switch

Switching loans or lenders (or both) could be the answer. But it can also be risky. To assess if you're likely to benefit from refinancing, ask yourself:

Refinancing takes time and costs money. Be clear about why you want to refinance. Decide the type of loan you want, list the required features and do your sums to make sure you won't be worse off in the long-term.

options

Fixed or variable rate loan

With a variable rate loan , payments increase when interest rates rise. This can affect family budgets and lead to changes in your overall financial circumstances.

Refinancing to a fixed loan can offer protection against rising rates. This can help borrowers who don't have the cash flow to cover higher loan repayments . Fixing also gives you the ability to budget over the long-term.

An alternative to fixing your entire home loan is to refinance to a split loan . Split loans let you fix part of your loan and leave the rest on a variable rate. Generally, split loans offer the flexibility and features of variable rate loans whilst offering the certainty of a fixed loan .

debt consolidation

Are expensive credit cards, store cards, car loans, and mortgage arrears making life difficult for you? Are you paying over the odds for credit? Why not try applying for a debt consolidation loan now. As long as you have real estate property to use as security in conjunction with your debts even if still under mortgage - We can help!

Why not take control of your finances and consolidate your debts into one manageable and more affordable loan thus reducing your total commitments. Just think about it, you can get rid of the debt collectors, even obtain more cash for future use such as business start-up, expanding your property investment, a special occasion, in fact for any worthwhile purpose.

Debt consolidation usually involves the refinancing of many existing loan facilities.

The consolidated loan may be with one of the existing lenders or a totally new one.