So the home loan you agreed to a few years back no longer caters to your current financial situation and you now need to make a decision on whether or not refinance. Here’s a list of everything you need to consider before making the big switch.
Set your goal
Whether it’s to gain lower monthly repayments or to access the equity of your property for a home renovation, there are various reasons why consumers choose to refinance. It can offer great savings with more competitive interest rates, loan features and reduced fees.
“Start by analysing your current situation and do a bit of online research to see whether a refinance would be beneficial for you,” advises an MFAA Mortgage and Finance broker.
Once you’ve done a bit of online scouring, the next step is to seek professional advice. Enlisting the services of a broker can assist you in finding the best loan to suit your situation, as they can negotiate on your behalf and walk you through the whole process.
“Brokers stay up-to-date with current market interest rates and most have access to over 30 different banks and lending institutions,” says the broker. “They’ll assess your current loan to make sure a refinance is suitable. They are unlike to advise on one if all you’re saving is $400 a year.”
Compare all your options
The competitiveness of the current market means that good deals are aplenty, so it’s always a good idea to take the time to consider your options and find the deal that is best suited to your situation. Write down a list of features imperative to your new agreement and always refer back to it while browsing.
“There is always the option of refinancing internally or externally,” says the broker. “Before switching lenders, speak to your current lender to see if they can provide a better deal, as the threat of leaving could usually prompt them into a making a better offer.”
The documentation required varies from lender to lender and the kind of loan you are switching to. However, in most cases, the paperwork required to support your application are details of your income, employment, assets and other loan commitments.
Take your time
Just like applying for your first loan, refinancing is a serious financial step and the more time you spend on the decision, the less likely you are to leave yourself open to risks. Weigh up all the applicable fees against the potential savings,” advises the MFAA broker. “The time frame for a refinance can be anywhere from a week to a few months depending on the bank you are moving to and from, but the end result is worth it. It’s always a competitive market so it’s good to be sure.”