- Posted 28 Feb
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Refinancing a home loan isn’t for everyone, but for some, it could result in massive savings almost immediately.
Before you make your final decision either way, consider the following Switching Guide – it bundles everything you need to know about refinancing your home loan in an easy-to-digest format.
The Question of Equity
Before you even think about refinancing, calculate the equity remaining in your home first. You can come to this figure by taking the value of your home (hint: get it appraised first!) and subtracting your outstanding mortgage.
The higher this number, the more equity you have, which translates to higher savings through refinancing. It usually means you’ll get favourable interest rates and lower overall fees too.
Consider the Economic Climate
Whether refinancing is a good idea doesn’t just depend on your personal financial situation. It’s also closely related to the current economic situation – take a look at the interest rates and gauge whether you see them moving up or down in the future.
At present, interest rates are seen as exceptionally favourable. It may not be worth risking waiting for a better base rate, as it’s already at a relative low point.
Can You Afford It?
Refinancing isn’t just about looking at the interest rates. The process also entails additional costs, such as exit and new establishment fees, as well as costs attached to moving home.
Before you sign on the dotted line, make sure your lender explains the exact conditions of the refinancing deal. Don’t let hidden costs or small print swing you into a deal you can’t afford.
Is It Possible to Move?
While your average loan term fixes you for a number of years, most of us will usually move before a mortgage expires. Don’t take it for granted that you’ll stay in the same house forever, as circumstances can push you in unexpected directions.
Ask your lender whether moving home will have a negative consequence on loan terms. Enquire about potential penalties attached to moving home and make sure you are prepared for them, should they exist.
The cost of refinancing a home is usually made worthwhile in a period of roughly five years. If you plan on moving before then, calculate whether the closing costs are low enough to make the option financially viable.
Thinking About Refinancing Your Home Loan?
If you need to retool your financial situation, refinancing your home loan is a legitimate avenue. Australian Credit and Finance caters to a wide range of customers, with its team of experts ready to help you with any queries you may have on potential refinancing options.
You can contact the Home Loan Experts at Australian Credit and Finance by calling 1300 735 557. Your call carries no commitment or obligation – the team will take you through the details of the application process.
Before you make the call, you may want to use the handy pre-approval calculator on our website to get a rough idea of how much you can borrow.