A Guide to Refinancing Your Home Loan

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Interest rates fluctuate from time to time – it can be quite an effort to stay on top of it all. If you have not reviewed your home loan in over a year, now would be a great time to do so and save some cash (let’s be real: the chance to set aside money that otherwise would have gone to payment of interest is too good to pass up!).

The home loans market caters to many different buyers, so by switching lenders and refinancing, you could potentially save thousands.

Not sure what refinancing is? No worries, we’ve got you. Here is an ultimate guide on how you can give your home loan a health check without a massive headache.

What is Refinancing All About?

Simply put, refinancing a home loan is when you take out a new home loan to replace your old loan. You could choose to stay with your current lender and make changes to your existing loan or change to a new lender who will take over your current mortgage.

While it’s most common to refinance due to new market offerings, a slight change in one’s financial or personal circumstances can also be the more important reason to make the change, such as needing cash for a new purchase or other investment-related purposes.

It’s a reasonably straightforward process. As soon as you have considered all the options made available to you by our mortgage experts, you can decide which to proceed with.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Why Should I Refinance My Home Loan ?

Apart from saving money, there are other reasons why you must consider looking at some refinance home loan offers, such as:

You may have prospective projects for which you need funding, and what better way to free up some equity than to refinance? If you have paid beyond 20% of your property’s value, this may translate to a line of credit that you can use for other personal ventures.

If the value of your property has increased over time, you will have additional equity in the property. Refinancing replaces your existing mortgage with a new home loan for more than you owe on your property. The additional funds go to you, and you can spend them on other financial needs.

It may be an excellent idea for people with several personal loans to consolidate them in a home mortgage to pay them off at a lower interest rate and an extended maturity period. Home loan rates are generally lower than other types and have longer terms. There will be risks associated with consolidating debts, so you should ask us whether this is the best option.

Moving all your banking business to a single lender could allow you to access package deals or other perceived benefits.

As the financial market evolves, so do home loan offerings. When you opt to refinance, you can benefit from newly-developed features in home mortgages. Some examples are the flexibility to make extra payments, cash-back deals, access to redraw facilities, and offset accounts.

With more competitive interest rates and unique elements of your refinancing that you can work to your advantage, your overall loan costs can be brought down significantly. You can even make the same monthly payments despite the decreased rates, paying off your mortgage faster.

Sometimes, even the best loan deals in the market will crash and burn with lousy customer service. It’s not surprising for some people to switch lenders when they are unhappy with their current one in terms of management. So it is best to consider refinancing if you want lenders who will genuinely give you your money’s worth in terms of service.

How Do I Refinance My Home Loan in Australia?

Refinancing your home loan in Australia can be a great way to save money and improve your financial situation. Here are the key stages to get you started:

Check Your Rates

The first thing to do is verify your current interest rate against those of refinancing home loan rates and see if yours fare better. If you think you are paying too much for your existing mortgage, it is a clear signal to refinance, given that there are better alternatives.

Negotiate with the Current Lender

The next step is to sit down and talk to your current lender to negotiate for a more competitive rate. They will likely give you a better option if the only other choice is to refinance with them or with another lender.

Do Pencil-pushing

Do some number crunching to ensure you are truly going after a better deal. Exit fees and break costs are involved, so remember to use a refinancing home loan calculator to scrutinise all your expenses.

Some institutions have offerings such as a refinance home loan cash-back when you decide to switch. These, among other things, will come into play in the calculations.

Other refinancing costs to bear in mind when considering refinancing are government fees, break costs, discharge fees, valuation fees and upfront fees on your new loan. With all the financial considerations, all the numbers must be laid out before making your final decision. 

Go for it!

When you have made sure that you will be able to save a substantial amount of money should you refinance, you can start the application process and let your lender go through the necessary documents and procedures to execute it. It would be best to discharge your current mortgage and pay all the fees so your new refinancing can push through without a hilt.

How Does Refinancing Your Home Work?

Refinancing your home loan can be a powerful financial tool, helping you save money, access additional features, and improve your overall financial standing. But how does it actually work? Let’s break down the process step-by-step, specifically for Australian borrowers:

1. Assess Your Situation

  • Goals: Identify your reasons for refinancing. Are you looking for a lower interest rate, shorter loan term, or access to additional features like redraw facilities or offset accounts?
  • Equity: Check your home equity. You’ll typically need at least 20% equity to avoid Lenders Mortgage Insurance (LMI).
  • Credit Score: Review your credit score. A good score increases your approval chances and qualifies you for better rates.
  • Financial Documents: Gather your current loan details, income statements, proof of identity, and property valuation.

2. Compare Loan Options

  • Research different lenders: Analyse interest rates, fees, features, and customer service.
  • Use online comparison tools: Quickly compare loan options side-by-side.
  • Consider a mortgage broker: They can compare multiple lenders and guide you through the process.

3. Apply for a New Loan

  • Choose your preferred lender and complete the application form.
  • Submit all required documents.
  • The lender assesses your application and creditworthiness before issuing an approval.
  • Negotiate on interest rates and fees.

4. Finalise and Settle

  • Sign the loan contract and arrange settlement with your current lender.
  • Settlement involves paying off your existing loan and transferring ownership of your mortgage to the new lender.

5. Enjoy the Benefits

  • Lower monthly repayments.
  • Shorter loan term.
  • Access to additional features.
  • Improved financial flexibility.

Remember that refinancing is a significant financial decision. Take your time, do your research, and compare your options before making a commitment.

A Guide to Refinancing Your Home Loan, refinance

So How Often Should You Refinance Your Home Loan?

There’s no definitive rule for how often you should refinance your home loan, but here are some general guidelines on when it may make sense. While there’s no set frequency, it’s recommended to weigh closing costs against interest savings and not refinance too frequently.

When Interest Rates Drop Significantly

If current interest rates are at least 0.75-1% or lower than your existing rate, it may be worthwhile to refinance. This can lower your monthly payments and total interest paid over the loan term.

When You Want to Adjust Your Loan Term

Refinancing gives you the flexibility to shorten or lengthen your repayment period. You could refinance to a 15 or 20 year mortgage to pay the loan off sooner or get a 30 year term to lower monthly payments.

When Eliminating LMI

If you’ve reached at least 20% equity in your home, a refinance allows you to cancel Lender’s mortgage insurance and stop paying the premium.

When Cashing Out Equity

When you need to tap equity for a major expense, refinancing lets you convert built-up home value into usable cash. Just beware of higher loan amounts and interest costs.

In determining whether refinancing makes sense, you’ll want to calculate break-even points and not refinance too frequently (more than 2-3 times over the loan), as repeat closing costs can negate savings. Monitor interest rate movements and your personal situation to find the optimal times to refinance.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Who Has The Best Home Loan?

Four major banks dominate banking in Australia: Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group (ANZ), National Australia Bank (NAB) and Westpac Banking Corporation (Westpac). 

Most banks offer flexible loan features (e.g., the freedom to choose between a fixed and a variable rate on your repayments).

What is a fixed home loan? This loan can guarantee that you must pay your mortgage at a single interest rate. Despite the volatility of the market, your rate is set in stone. However, for some people, the freedom a variable rate provides is more of what they are after.

Let’s look into the offerings of the Big Four banks and examine their distinct selling points to borrowers.

CBA Bank

While the $2,000 cashback offer for home loan switches has ended, CommBank still offers various competitive home loan options with attractive features. In addition, being a local Australian institution, they have a dependable, quick support system for all their clients.

They have the technology to make customer servicing seamless with a virtual banking assistant and an app for easy loan management anytime, anywhere. They also have leading experts in their workforce to service your every need whenever necessary. 

CommBank also has flexible loan features such as various free offsets and redraw to help you save money in your loan repayments and manage your funds the way you want. They also have a seamless refinance system, FASTRefi®, to help out eligible clients with their refinancing.

ANZ Bank

Like CommBank, ANZ also offers the flexibility to manage your loan, whether you plan to repay it faster or redraw your available funds. Depending on your preference and needs, they can provide both the certainty of a fixed-rate loan and the flexibility of a variable loan. You can choose a split loan where you can enjoy what both loan types can offer.

You can enjoy the absence of ongoing fees and competitive rates with their Simplicity PLUS home loan. You can go on their website and use the refinance home loan calculator to check how much you can borrow and what your repayments will look like.

NAB Bank

As a 150-year-old Australian bank, NAB has a vast array of home loan offerings tailored to borrowers’ specific and varying needs. They take pride in developing various loan packages that will address the changing needs of their clients.

They boast a 95% LVR and LMI, which they can offer to their customers to help people become eligible for a refinance despite lacking the 20% down payment for their properties. 

They also have fixed and variable home loan packages, low upfront costs, split loans, lines of credit, and paying interest only, among many other features.

Though there are compelling reasons to take out a home loan or to refinance with the Big Four banks, there are also real advantages to going with other lenders – it all comes down to personal preference and needs. The right lender can help you save money in fees and interest over the life of a loan.

It requires much research, and we know we are here to help you do the legwork needed to ensure you can secure the best rate (keep in mind that the lesser-known lenders often have more to offer). 

Need Help Refinancing Your Home Loan?

If you’ve been making those mortgage payments faithfully for years, it might be time to reap the rewards! Refinancing can offer you:

  • Better rates: Lower your interest rate and save big on your monthly repayments.
  • Special features: Access valuable tools like offset accounts and redraw facilities for greater financial flexibility.
  • Consolidate debts: Streamline your finances by combining your mortgage with other debts into one manageable loan.

Odin Mortgage makes refinancing easy. We offer a smooth process with expert guidance and support every step of the way. We’ll help you compare loan options, handle the paperwork and get the best deal.

Start saving money and unlock the full potential of your home loan. Contact Odin Mortgage now!

Frequently Asked Questions

Suppose your current home loan comes as a package with various other features, such as credit cards, term deposits, or transaction accounts. In that case, securing refinancing with another lender is still possible. Some even offer to take care of these things for you to help you in the switch.

The first step is to contact your lender of choice and talk to them about the transfer. 

The security of your employment is one of the most critical factors in your loan application. To be eligible, you must typically hold your current job for at least six months before applying.

If your work situation changes in the middle of processing, you must inform your lender and check if you can work out a deal while you are in between jobs.

The best times to refinance are when interest rates drop around 0.75-1% below your current rate, you want to change your loan term, eliminate LMI, or cash out some equity. You also need to consider closing costs and break-even timeframes to ensure refinancing makes financial sense.

While there is no set limit, it’s not recommended to refinance too often. As a general rule, aim to refinance only 2-3 times over the life of the loan. Frequent refinances rack up closing costs which eat into any potential savings.

A refinance application will require a credit check which results in a small, temporary drop in score. However, enhancing loan terms through refinancing can improve your debt-to-income and credit utilisation ratios. This boosts your score over the long run.

Typical refinancing closing costs range from 2-5% of the mortgage balance. These include origination fees, appraisal fees, credit check fees, attorney fees, recording fees and more. Make sure interest savings exceed costs.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.
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