A Fresh Start: Refinancing Your Home Loan for a Better Financial Future
Are you looking for a better interest rate to lower your home loan repayments? Are you planning to buy an investment property or finally considering the renovation you’ve always dreamed of? Refinancing might be the answer you’re seeking. At ARG Finance, we have a team of refinancing mortgage brokers.
who can compare hundreds of loans from a wide range of lenders and work closely with you to find the right option for your individual needs.
What is Refinancing?
Referred by some as ‘loan switching’, refinancing is basically the process of paying out your current home loan by taking out a new loan. This can be done with a new loan from your existing lender or through a different lender.
Refinancing is usually good for those who find that their current loan is no longer suitable for their changed circumstances.
WHAT CAN YOU REFINANCE FOR?
Mortgage refinance can be used for a range of projects and goals, including:
- Renovation and home improvements
- Paying off all debts by rolling them into one loan
- Obtaining a cheaper rate
- Accessing cash for vehicle or appliance purchase
- Switching from a variable rate to a fixed rate
DRAWBACKS OF REFINANCING
It’s important to be mindful of the potential drawbacks of refinancing, which may include:
- At times, short-term costs can exceed the long term savings
- Paying interest on the balance for a much longer period
BENEFITS OF REFINANCING
Refinancing a home loan can offer a number of benefits, such as:
- Peace of mind with fixed monthly repayments
- Reduced interest rate and monthly payments
- Flexibility to pay off loan quicker
- Consolidation of debts (credit cards, personal loans and other debts)
- Unlocking the equity in your current property to finance your plans
SITUATIONS WHEN REFINANCING SHOULD NOT BE CONSIDERED
There are some situations wherein a refinance in Melbourne should not be considered, including:
- If there is a costly exit fee applicable on your old loan
- If you don’t have a reasonable amount of home equity, which is at least 20% of your property’s current market value (in this case, you will have to pay Lender’s Mortgage Insurance)
- If your credit history has a few black marks of missed repayments or overdue bills
Loan Features to Look Out For
Refinancing services can give you access to additional home loan features, such as:
- Flexible repayments and extra repayments to pay off the loan sooner
- Repayment holiday to take a break from repayments
- Offset account to reduce your monthly interest and repayments
Additional costs associated
EXIT FEES
When you pay off your loan early (for example, in the first 3-5 years), exit fees are applicable. These are either a percentage of the loan balance or a fixed amount.
BORROWING COSTS
During refinancing, the new lender often charges a range of upfront fees which may include:
- Loan application fee
- Valuation fee for a professional property valuer
- Settlement fee
LENDERS MORTGAGE INSURANCE (LMI)
LMI is paid by the borrower to insure the lender of any risks in case the borrower defaults in their repayments. If you are borrowing 80% or more of your property’s value, then LMI is applicable to you. Also, LMI is a non-transferable payment, which means that you’ll have to pay LMI again if you refinance.
STAMP DUTY
Stamp duty is the tax charged by the state government on your mortgage and is calculated against your loan amount. If refinancing increases the size of your home loan, you will have to pay stamp duty.
MORTGAGE REGISTRATION FEE
A mortgage registration fee is paid for registering your loan onto the property’s title record to the Land Titles Office or equivalent.
Process of Refinancing
The process of refinancing a loan is very similar to the process of applying for a home loan. Still, here are the following steps that people typically follow:
STEP ONE: RESEARCH
Compare your current loan and interest rate with what other lenders are offering. Are there one or more competitive options worth considering? Could you potentially save thousands of dollars in the long run by switching to a different provider?
STEP TWO: CONSIDER YOUR REASONS
Evaluate your motivation behind refinancing a loan. Is it because you are looking for a lower interest rate, accessing equity for emergency cash needs, wanting to switch to a different loan with better product features, or refinancing for debt consolidation?
STEP THREE: PICK THE RIGHT LOAN
Create a ‘shopping list’ of the features you want and then choose a loan that fits all or most of these criteria. You can get advice and guidance from our refinance mortgage broker to discuss your options.
STEP FOUR: SUBMIT THE APPLICATION
The approval process is going to be very similar to your previous loan process unless you’re going with a different lender, in which case you’ll need to provide the following paperwork:
- Recent pay slips
- Documents of your existing loans
- Your latest council rates notice
- Evidence of the building insurance policy
STEP FIVE: VALUATION
Valuation of your current properties will be done by the new lender, and it is often chargeable for anywhere between $200 and $300.
STEP SIX: FINANCE APPROVAL
At this point, your lender will give you a formal or unconditional finance approval and will instruct a solicitor to prepare the loan documents on their behalf to get them approved and signed by you.
STEP SEVEN: ARRANGING SETTLEMENT
Your new lender will settle your previous loan with your previous lender for establishing a new loan. Once this process is done, you have a brand-new loan!
Refinancing calculators
HOW ARG FINANCE CAN HELP
When refinancing your loan for any reason, it pays to do your homework. To set ourselves apart from other mortgage refinance companies, our highly knowledgeable and experienced brokers:
- Take an objective look at your individual situation, your goals and your current loan to give you an accurate picture of how much you can borrow and help pick the right loan for you.
- Clarify the costs and the benefits of refinancing to ensure you understand if it is going to be a profitable option in the long run. Also, you’ll be informed of all the associated fees so that there are no surprises for you.
- Support you at every step of the way and guide you through the application process whilst streamlining it for you.
We also give you access to a refinancing calculator that gives you a breakdown of your repayments, potential savings and interest. We pride ourselves on having more than one refinancing home loan calculator you can use, allowing you to know what to expect.
Frequently Asked Questions
How long does settlement take when refinancing?
It depends on various factor, such as the lender, type of loan and complexity of your financial situation. Typically, settlement can take anywhere from 4 to 8 weeks. However, some lenders may offer a faster settlement process while others may take longer. It’s important to communicate with your lender and submit all required documents promptly to expedite the process.
Do you pay stamp duty when refinancing?
It’s possible for stamp duty to be payable when refinancing a property, but the amount will depend on the state or territory in which the property is located, the value of the property and how much is being refinanced. It’s recommended to check with your government authority or consult with a mortgage broker to determine what the refinancing stamp duty VIC requirements are for your specific situation.
What is the purpose of refinancing a home?
The purpose of refinancing a home is to obtain a new mortgage with better terms than the current one. This can include getting a lower interest rate, reducing monthly payments or changing the loan term. Homeowners also refinance to switch from adjustable-rate mortgages to fixed-rate mortgages or to access equity in their home through a cash-out refinance. Refinancing can save you money over the life of the loan but may also come with costs such as exit fees.
What is refinancing?
Refinancing is the process of obtaining a new loan to replace an existing one, often with better terms and interest rates. The goal of refinancing is usually to save money over the long term or to improve the borrower’s financial situation by reducing monthly payments or freeing up cash flow. Refinancing is available for various types of loans, including mortgages, car loans and personal loans.
Is it a good idea to refinance a loan?
Refinancing a loan can be a good idea if it results in lower interest rates, lower monthly payments or a shorter loan term. However, it’s important to consider the associated costs of refinancing to ensure that the savings from refinancing will outweigh these costs in the long run. Additionally, if the original loan has a low interest rate or if the borrower plans to sell the property or pay off the loan soon, refinancing may not be worthwhile. Ultimately, the decision to refinance should be based on careful consideration of individual circumstances and financial goals.
Why would you refinance?
You might refinance to take advantage of lower interest rates, reduce your monthly mortgage payment or shorten your loan term. Refinancing can also help you tap into your equity to pay off high-interest debts, finance home improvements or cover other expenses. It’s important to assess the costs and benefits of refinancing to determine if it’s the right move for you.
Does refinancing hurt your credit?
Refinancing can have a temporary negative impact on your credit score. When you apply for a refinance, the lender will check your credit history which can lower your score by a few points. However, if you make timely payments on your new loan, your score should recover and may even improve over time.
Enquire Now
Look no further than ARG Finance for expert assistance with refinancing. Give us a call or send us an email and one of our team members will contact you as soon as possible.
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