Refinance

When you refinance a home loan, you change your existing loan from one loan product to another. This way, you know precisely what you want from refinancing. If you already have a home loan, you may be looking to refinance because your current loan doesn’t suit your current needs. 

There are two different types of refinancing. You can refinance to an external lender, where you move your loan to another lender or stay with your current bank and refinance internally. Internal refinance is typically quicker and is a good option if you are trying to access equity on your home. You can use your equity for renovating your home, consolidating debts, or buying a new asset like a car.

Benefits of Refinancing a Home Loan

1. Lower Repayments

Your monthly repayments will reduce if you refinance to a lower interest rate. This is great if you are trying to lower your repayments to a more manageable size.

2. Same Repayments

Instead of worrying about your variable interest rates rising or lowering, you can opt for a fixed home loan. This fixes your home loan interest rate for a specific period of time. Usually for a 1,2,3, or 5-year period.

3. Change Your Loan Period

Refinancing is an excellent time to review your financial position and plan if you should shorten or lengthen your current loan period. Lengthening the period will typically lower repayments. You’ll pay more interest overall in the long run, while shortening it will increase your repayments but lower the interest you pay overall.

4. Use Your Homes Equity

You can use part of the balance between the value of your home and the remaining loan balance to make big purchases. Commonly used to purchase a car, investment property, other investments, or renovate your house.

5. Cash Back Bonus

Some lenders may offer a cashback bonus of a few thousand dollars to refinance your home loan to them. This can help offset any costs, and leftover money can be placed into the home loan. We will talk to you about this option if we work with us.

An example of how to work out your home’s equity is: If you have a $500,000 property with a $300,000 loan. You would then have $200,000 in equity.

6. Consolidate Your Debts

Gather your high-interest debts and consolidate them into your home, which would generally have a much lower interest rate.

Reasons not to refinance

You will want to ensure that the cost of refinancing will put you financially ahead. There is no point in refinancing if you are going to be losing money. 

Refinancing consistently could also impact your credit score. When you apply for a loan, your credit file will be requested. Some lenders may see this and decide to decline your home loan application.

Listed below are some potential costs you may come across when refinancing. In some instances refinancing can be completely free, but we don’t want you to get any unexpected fees you don’t know about if you plan on refinancing yourself.

Refinancing is similar to the first time you applied for a home loan. So some of this information you may already have some previous knowledge about.

Potential Costs:

• Mortgage Broker Fee (Potentially Complimentary, see below)
• Valuation Fee (Up to Lenders Policy)
• Loan Fee (Up to Lenders Policy)
• Break Fee (Refinancing away from a fixed rate)
• Lenders Mortgage Insurance (Up to lenders Policy, Loan-to-value Ratio and Promotions)
• Solicitor’s Fee
• Ongoing Lender Fees

If you choose to use Read Finance to refinance, we attempt to make all simple refinances service complimentary, meaning you won’t pay for our service. A complicated refinance that will take extra time may have a service fee. You’ll be well-informed about our service fee and if it is complementary before we start. Using our service, you’ll also be aware of potential costs before they happen.

You should always compare the costs of refinancing to the amount you will save. Below is a table showing an estimate of how much you would have each month if you refinanced away from a 5% interest rate with different loan balances.

Estimated Monthly Savings With Lower Interest Rate

	-0.5%	-0.75%	-1%
$225,000	$67	$101	$133
$400,000	$121	$180	$238
$700,000	$211	$314	$416
$1,000,000	$302	$449	$594
$1,300,000	$392	$583	$772

Loan Amount (Left) – Interest Rate Decrease (Top)

As you can see in the table, if you had a loan of $700,000 you could potentially save $4,992 in repayments over a year. Depending on your goals, this could be used to lower the current loan amount, placed in an offset to save on interest, or even go on a holiday.

If you are refinancing to consolidate your debts, your mortgage interest rate could be much lower than personal loans. Doing this will mean you’ll be paying the debt you consolidated over a longer period of time though. 

Refinancing your home loan internally can sometimes be done within the same day. Depending on what is being done, a simple rate change will be quick while accessing equity may take longer. This is because you’ll need to have your serviceability checked to ensure that you can service the loan.

Going to an external lender may take the same time as getting a new home loan. You would move to a new lender where it may take longer to refinance because the product they offer aligns more with your goals. This process could take days or weeks.

Each lender has different times it takes to approve a refinance. We have access to data that some lenders give us that state their average times to credit assessment and approval, and we can tailor your refinance to this if you need it done sooner.

There are many benefits of using a mortgage broker to help you refinance your home loan. They are professionals who deal with home loans daily and can help structure and guide you to make the decisions that align with your goals. 

At Read Finance, we work with you from the very beginning. So there is never a point too early to get in contact with us.

With our panel of lenders, we can compare each of the lenders products and find a solution that best suits you. We ask you valuable questions to ensure we find the right product for both now and in the future.