What Does Refinancing Mean For You?
Refinancing is a term used for when a loan(s) is moved to a different lender to save money. Here are the top 5 reasons why you should refinance.
1. Reducing monthly repayments by taking advantage of a better interest rate.
2. You could consolidate multiple loans into one. This potentially saving you money.
3. Extending out the life of the loan to reduce monthly repayments.
4. Reduce the risk. Eg: Switching from a variable rate to a fixed rate.
5. Free up cash/ equity.
These all sound pretty good. At the end of the day, it’s really about your individual requirements, both immediate and longer term, and how the refinance is going to help you achieve your goals.
Why do people refinance?
Currently, refinancing is being done for a range of reasons. Research conducted by the MFAA and Bankwest concluded that the most popular reason for refinancing has been home renovations. Followed by buying an investment property, buying a new home, the need for more funds, and a more compelling rate.
The above reasons are mostly to do with people improving the value of their properties. And good on them for doing so. Upon selling, they enjoy a greater return, and therefore more money to either upgrade to a more desirable home, pay off their mortgage quicker and become debt free, or purchase whatever they want! So there really can’t be many complaints coming from them.
However, refinancing can be
a tricky process and does involve a range of fees, and a bit of patience, which is why it’s usually done to finance projects that are worth the effort.
Note: Refinancing should only be done at least a year after you first took out your loan. And regularly refinancing is not a good idea. Prepayment penalties and discharge fees do apply… And they are often quite hefty and is the main reason why you either will, or will not go through with refinancing. So it’s a good idea to get in touch with a broker to assist you with this process.
During the refinancing process, the new lender will perform a valuation on your property. You may have to pay for this depending on the lender, but most of the time it’s free. After the valuation, it’s just a matter of time before you find out if the loan has been approved or not. Upon approval, documents will need to be signed and then your refinance will be completed soon after.
So how can a broker assist in this process?
They assist by pushing through the loan faster, finding you the best rates, and giving you advice about things that you may not be aware of (such as any lender specific costs, or potential difficulties). So, if you have any questions, please leave them in the comments section below and we’ll get back to you as soon as possible. Alternatively you can email us at firstname.lastname@example.org
Written by Michael Guy, Pure Finance