Refinance Home Loan:

One of the most significant aspects of your home loan is its length. People borrow money for all sorts of reasons but most of these loans are for a short or relatively short period of time. Not so with a mortgage. In the vast majority of cases you borrow to buy your place of residence with a loan lasting 20, 25 or even 30 years. Now a lot can change in that time.

Your financial situation could improve or be reduced. The economy of Australia could improve or take a turn for the worse. The interest rates set by the Reserve Bank could move significantly up or down. And all of this means that at some time in the period of your loan you might wish to refinance. You may feel it would be a sound economic move to change your loan arrangement.

Now this can be done in different ways. You could stay with your current lender and re-negotiate your current loan. Or you could find another lender and strike a deal with them which will include paying out the company which gave you the original loan.

How you go about all this requires you to take certain steps which include the following.

• Know your current loan details very well
• Know the costs of changing lenders
• Know the new conditions you will face
• Consider using the new loan for something else
• Locate all your documents
• Do your sums

Many people with a 25 year home loan simply get on with life, make their monthly payments and don’t give their mortgage much thought. If you want to refinance your home mortgage you will need to switch on to the fine details of your current loan. How much have you paid? How much do you owe? Are you ahead in your payments and if so by how much? It’s pointless considering refinancing a home loan without first knowing all there is to know about the finances you currently enjoy.

Then you need to know the costs of changing lenders. Legislation may exist to stop financial institutions charging exorbitant fees if a borrower seeks to get out of their loan arrangement but check first. Obviously you’ll want to know the details of any new loan before agreeing to it. It’s no use leaving one difficult financial situation only to step into another. Get all the facts including possible stamp duty charges. You’ve already paid that tax once on your property. Legislation governing stamp duty differs according to where you live in Australia and a refinanced loan may or may not attract the tax. Check first.

If you are going to refinance, you might want to consider taking on additional funds. You might be able to use the equity in your house to make the refinancing allow you to do something else. The extra funds could enable you to extend your property, buy another property, a new car or take a trip.

Some people are meticulous in their housekeeping and others are pretty hopeless. If you are going to refinance your home loan, you will need the relevant documents. The mortgage papers, your bank statements, income verification and the like. If you’ve had no need to use these documents for many years, it might mean a search of the attic or a trip to your bank.

Now the idea of a home equity loan may seem exciting and it can be if done properly. But with all financial arrangements, you must do your sums. You could use an online mortgage calculator to see how the current loan and any proposed new loans stack up. But take your time and even consider seeking professional financial advice. It’s a big step so make it work for you.

Why refinance home mortgage loans?

There are several reasons to make such a move. Here are just some. You can save money. If interest rates have changed and you can obtain a loan at a cheaper rate, you will save money, pay off your loan quicker and be debt free sooner. That makes sense.

Take advantage of your better situation. If the value of your property has increased substantially, you can refinance knowing the equity is available and use the new funds to invest for the future. You could also pay for your children’s education or some other worthwhile expenditure.

You can get rid of other loans and consolidate your debts. You may have money owing on credit cards and by refinancing you can remove all these smaller debts and have only your new refinanced home equity loan to pay. Clean up your financial act, so to speak.

The costs involved in breaking your home loan may be high but even if they are costly, a new home mortgage loan with a better interest rate could see your net costs significantly reduced. In short, you could save some serious money.

One of the first steps you could take would be to get your present home valued. You may have seen houses in your area sell and noted the prices. That’s only a guide and you should get a serious valuation of your property. If that figure is high and accurate, you are in a strong position to consider refinancing your current home loan.

Times have changed

If you took out your present home loan 15 or 20 years ago, you would have been dealing with a different financial situation. The world of banking and home loans has changed. Your refinanced home loan might include different elements including a line of credit, offset accounts and the facility to redraw funds. Before you sign anything, find out about how the home loan industry has developed over the years and what it can offer you today.

Most people have their health checked on a regular basis particularly as they grow older. The same can and should happen with your mortgage. Get its health checked out to see how it is working. If it’s sick it might need some sort of overhaul including refinancing.

This guide is general information only and is not product advice. If you need advice on your circumstances you should seek professional financial advice.