How to: Refinance

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Posted date: July 19, 2013 | | No comment

Why consider refinancing?  How does it work and how do you know when it’s the right thing for you?

What is it and why do it?

Refinancing is when you take out a new loan with your existing or a new lender, using the money from the new loan to pay out your old one.  It’s a popular option for people wanting to access the existing equity in their home in order to fund renovations, holidays or make other investments.

Other reasons to consider refinancing your home loan include:

  • Rolling all your debts into one;
  • Taking advantage of falling interest rates and lower fees;
  • Accessing better features attached to a home loan, and
  • Switching from a fixed to a variable home loan (and vice versa).

When to consider it

Refinancing can be lengthy and potentially costly.  You need to ask yourself if it’s the right thing for you so consider whether:

  • You’re happy with your current lender – are they professional and helpful?
  • You’re happy with your current loan – is the interest rate competitive, are you paying for features you don’t need or do other loans offer features that would benefit you?
  • Your financial situation has changed – have you started a new job, gotten a pay rise or have become unemployed?

Consider the risks

Refinancing involves fees and charges which can include application, establishment, handling and registration fees on a new loan, early settlement and discharge fees on your old loan as well as mortgage insurance and stamp duty.  These costs can be significant and can outweigh the benefits of refinancing so make sure you consider your home loan refinancing options carefully.

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