Refinancing Your Home Loan
If you are a homeowner with a mortgage, chances are you have heard of the term ‘refinancing’. Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender who can better meet your current needs. Refinancing can also allow you to consolidate your debts and pay down your mortgage quicker.
However, refinancing may not be the best option for everyone. If you are considering refinancing it may be time to speak with your mortgage broker to discuss the following:
Do You Have Enough Equity In Your Home?
Equity refers to the value of your property less all associated debts. One reason borrowers look to refinance is to access equity within their property. This may be for example to renovate, or perhaps to purchase an investment property.
As an example, equity is calculated:
Value of property $500,000 less loan amount $350,000 = $150,000 equity.
Most lenders will allow borrowing up to 80% of the value of the property before lenders mortgage insurance is applied. Lenders mortgage insurance or LMI, is insurance ‘the borrower pays’ to the lender.
For example, (maximum equity amount at 80%):
Value of property $500,000 x 80% = $400,000 less loan amount $350,000 = $50,000 in equity available.
“Before refinancing, it is important to discuss your options with your mortgage broker to firstly ensure you have enough equity and secondly, that you do not inadvertently have to pay LMI.”
Are You Looking To Pay Less Interest?
Some people are savvy researchers and will want to take advantage of a lower interest rate from an alternative lender. Lowering your interest rate could potentially save thousands over the life of you loan.
Before refinancing, it is important to consider all the costs. These costs can include; exit fees, application fees and title registration fees. Your mortgage broker will be best placed to weigh up all of the costs and compare the benefits to ensure you are making the correct decision.
To ensure the best outcome, your mortgage broker will need to find out about your current financial situation. This will include, calculating your income and expenses, considering your debts and assets to ensure you remain financially eligible to service the loan amount.
In some cases, your mortgage broker can assist with securing a lower interest rate from your current lender without having to go through the entire refinancing process.
Have Your Circumstances Changed?
A change in circumstance, such as a separation, changes to your employment arrangement or even an inheritance may trigger an opportunity to consider refinancing.
While saving money is often one of the biggest benefits of refinancing, it may not be straightforward and careful consideration is required. Working with a mortgage broker rather than going straight to a lender has advantages. Mortgages brokers generally have access to loan options from a range of different lenders (on average 34 lenders). If there is a better option, a mortgage broker will find it!
Discuss Your Situation With Barwon Mortgages
With more than a decade specialising in home loans and refinancing, our mortgage brokers can assess your situation and recommend the best approach to help you achieve your goals.
Please contact Barwon Mortgages by phone on 03 4216 5281 or via email at mail@barwonmortgages.com.au