When is Refinancing Your Home Loan a Good Idea?
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What is home loan refinancing?
At one time or another, many people consider refinancing their home loans, for a variety of reasons.
Refinancing a mortgage is simply the process of paying out an existing loan by replacing it with a new loan, usually from a different lender.
Refinancing may not always be appropriate
However, depending on your circumstances refinancing may not always be a good idea if you are doing it merely to get a better interest rate.
For example, if your existing loan has been in place for only a few years, the current interest rate may actually be higher than your existing home loan interest rate.
You should also be aware that refinancing involves other costs, including loan establishment fees, valuation fees and title search. Also, if you are currently on a fixed rate loan, you may incur exit fees if you refinance. If you are currently paying Principal and Interest on your home loan, you might also look at switching to an interest only loan facility.
Refinancing your mortgage with our home loan brokers
Our team of home loan specialists are very experienced in guiding individuals and businesses through the solution that best suits your circumstances.
Before you make a decision to refinance, you could also consider extending the term of your current loan, which will mean lower monthly repayments.
Historically speaking, it is a good idea to refinance your mortgage if you are looking to:
- Get a better interest rate
- Change the type of interest attached to your home loan (fixed or variable, or a combination of both)
- Change the type of loan (interest only or principal and interest).
- Shorten the term on your mortgage
- Take advantage of a lender who provides a better customer experience or loan features
- Use the equity in your home to consolidate debt (see below)
- Obtain a loan to avoid Bankruptcy or Insolvency
- Use the equity in your home to obtain funds for some other purpose that you cannot finance with your own funds, for things such as:
- Use the equity in your home to obtain funds for some other purpose that you cannot finance with your own funds, for things such as:
- a. equipment finance
- b. your children’s education
- c. paying off a Tax Debt
- d. paying out a car loan
- e. paying for your home renovations or extensions
Refinancing to consolidate debt with our fast loans and bad credit loans
If you are refinancing to consolidate debt, this is usually a good strategy. However, you need to be careful not to fall into the trap of overspending. This sometimes happens when people pay off their credit card debt using a new loan facility and are tempted to spend when they suddenly have credit available to them again.
Pitfalls of drawing cash out when refinancing
Remember, taking cash out when you refinance does not help you achieve the intended goals of:
- Reducing your debt
- Increasing savings
- Increasing equity
- Reducing loan repayments
Our Home Loan brokers can assess which type of loan refinancing best suits your situation and needs. We take a personal and empathetic approach, to determine if, on a case-by-case basis, refinancing (to bring your debt under control) is in your best interests.
We can usually provide fast loans for people urgently seeking to bring their debt under control.
What is the process once you decide to refinance with our home loan brokers?
If you do decide to refinance your home loan, you are basically applying for a new loan. The application process is similar to when you took out your original home loan.
We can find the home loan that best serves your needs. This saves you a lot of time and our experienced team make the process seamless and enjoyable.
As soon as your refinance loan is approved, the switch from your old lender to the new facility will usually occur within a few weeks. This is due to necessary behind the scenes administrative processes taking place between the 2 lenders.
Before you refinance, check your goals with one of our mortgage brokers
You should ask yourself:
- Why do I want to refinance?
- What are my goals?
- Does my personal situation suit refinancing?
- Have I spoken to an experienced mortgage broker to determine eligibility and suitability for refinancing?
