Reviewing your mortgage is being smart with your finances. Why do we do it? Because a reduction in your interest rate, will save you big big $$$ over the term of your loan.
So what does refinancing mean?
Refinancing simply means moving your home loan from one lender to another. And when you refinance to another lender, it’s considered a new loan to them and they’ll often offer sweet deals to bring you over.
Before you decide to refinance, it’s worth looking at what your current lender is now offering because there might be a new home loan with more flexible features that meets your needs.
How do you refinance your home loan?
Often, the first step is to talk to a lending specialist (A Broker) They will outline what’s involved in moving your home loan to the new bank, guide through the process, advise you on where you’ll find the best deals and be on call when you need them.
Once the decision is made to refinance, and your broker has found you the best deal, you’ll need to apply for a new home loan with the lender you’ve chosen (this is all handled by your broker). A valuation of your property will be carried out and you’ll usually need to give them statements on your current home loan, as well as a payout figure. This is the amount remaining on the loan that will be paid out to your current lender.
You’ll also need to organise a discharge with your original lender. This can take a few weeks so should be arranged early. A settlement date will then be agreed between the two lenders to transfer the mortgage title.
Is there any reason I can’t refinance?
There are a few factors that could mean you won’t be able to refinance your home loan.
If you don’t have a low enough loan to value ratio (LVR) there could be insufficient security against the new loan and a lender might not approve it. This would happen if the property value has decreased or a new valuation assigns it at a lower value. In this case, it’s worth talking to your lender to find out what your options might be.
You may also be outside the new bank’s lending policy, or you may not meet the bank’s credit assessment criteria.
The costs of refinancing
Discharge costs
Banks will usually charge a fee for you to discharge your mortgage. The cost varies from bank to bank and usually takes a few weeks to be processed.
Lenders Mortgage Insurance (LMI)
When you refinance your mortgage and your new bank is lending you over 80% of your property’s value, you may need to pay LMI.
Breaking a fixed rate loan
If you’re currently on a fixed rate loan at your bank, you may incur a charge to break that term early. The cost depends on how long is left to run on your fixed term and what your fixed interest rate is. Your current bank will be able to provide an estimated break cost.
Recommendations;
Platinum Realty Group work with our own in house Broker Mr Rob Barton. Rob has a wealth of knowledge and there is currently no fee directly to you for his service.
If you’d like me to put you in touch, please let me know.
Cheers
JOHN KEMSLEY
Managing Director
Platinum Realty Group