The property market in Australia is changing rapidly. Interest rates are going up, and property prices seem to be dropping. It is a bit hectic. If you own a home, upward pressures on interest rates and the cost of living could have you looking at your home loan and wondering if you can get a better deal. It could be the perfect time to refinance your mortgage.
Real Simple Home Loans are here to help you in any stage of your home-buying cycle, including refinancing. You can use our mortgage refinance calculator to determine how much you could save.
Read on and find out more about refinancing your mortgage.
What is refinancing, and why would you do it?
In short, refinancing your home loan is where you switch your existing home loan to a different lender or stay with your current lender but switch to a better product.
You can do this to take advantage of better interest rates, lower fees or other options and additions to a home loan product that can help you save money in the long run.
Benefits of refinancing your home loan
There are some solid benefits to refinancing your home loan.
- Shortening the life of your loan. If you can refinance your home mortgage to a lower rate, it will take less time and money to pay off, saving you thousands of dollars.
- Free up home equity. You can have some money to help renovate your home or take a well-deserved vacation.
- New features. You could refinance to a loan with added features such as an offset account. This helps you pay your loan off quicker each month.
- Maintaining control of your finances. When refinancing a loan, you are made aware of your budget, and how much you’re saving and spending. It is a great way to hit reset and get your money health back on track.
Steps on how to refinance your home loan
Here are the 8 steps you’ll be going through on the way to refinancing your home mortgage.
Step 1: Knowing why you’re refinancing
This might sound a little obvious, but remember- you’re still working with large sums of money and years of debt to pay. If you’re simply changing loans for a lower rate, you might not be seeing the bigger picture.
A big ‘why’ is to save money. You need to check for any hidden costs and fees involved in changing your mortgage to another lender.
Step 2: Calculating the numbers
Do the math. And to help you do the math, we have a calculator to help you with refinancing your home loan.
Most often, the maths will work out in your favour. Remember to include any new fees and charges associated with refinancing and if there are early exit fees from your current lender.
This calculator will help you understand your budget going forward, which can help you pay more off your home loan, or go towards other life items.
Step 3: Comparing home loans
What loans are out there in the market? You can shop around yourself, or you can use one of many websites that can compare home loans for you. Or you can even engage the services of a mortgage broker.
The more loans you can compare, the wider your selection and the bigger savings you can potentially make.
Step 4: Choosing your new home loan
Once you’ve compared the loans and seen which ones have different features, you have to choose the loan you want to apply for. Enquire with the lender to see if you’re eligible to apply. If they will, in fact, lend you the money.
Step 5: Applying for your new loan
If all goes well, now you apply for the loan. It is just like applying for your previous loan, with your bank details, pay slips, and a detailed list of your saving and spending habits all required.
Step 6: Preparing for a property valuation
Have your property professionally evaluated. Not appraised by a real estate agent, but a professional valuation. This will give you the value of your property, and how much it has increased in value.
This amount shows the equity you have on your home at the time of refinancing.
Step 7: Loan approval
Once you have shown the lenders the updated value of your home, to show how much equity you have, and you’ve proved you can save and pay off the new loan, you will get approved.
This money is used to pay off the remainder of your old loan.
You’re now paying a new home loan on your current premises.
Step 8: Settlement
Settlement is when your new home loan is used to pay off your current home loan. Usually, your new lender will cross all the T’s for you. This includes paying out your home loan, including any fees, and registering a new mortgage for your property.
There may be some paperwork you need to complete- a Discharge Authority Form. This form notifies the current financial institution that your loan will be repaid and closed.
Home Loan Blogs & Articles
If you want to learn more about the process of buying a home, saving for a deposit, or more, browse through our blog section. It is full of ways to help you get started in the property market.
Our team here at Real Simple Home Loans is also ready and waiting to give you tip-top advice on property, home loans and more.