Tips for a Successful Home Loan Refinance
Before you start shopping around for the best refinance deals, you need to be prepared. Keep these key tips and tricks in mind when refinancing your home loan.
Refinancing your home loan could provide a plethora of benefits for savvy borrowers. But before you start shopping around for the best refinance deals, you need to be prepared. Keep these key tips and tricks in mind when refinancing your home loan.
Understand your needs
First and foremost, figure out what you want from your home loan refinance. Think about your financial goals and needs. Do you want to pay off your mortgage quicker? Do you want to lower your repayments? Do you want to use your home’s equity? Or do you want to maximise savings?
To get the most out of your home loan refinance, you need a good strategy. Answering these questions above can help you determine the best course of action.
By simply understanding your motivations, you can avoid common pitfalls of refinancing a home loan such as choosing the wrong refinance option, refinancing too early or too late, and not taking advantage of new loan features.
Improve your credit rating
It may be beneficial to improve your credit rating (if you haven’t already) before applying for a home loan refinance. Refinancing your home loan is essentially applying for a new mortgage to replace your existing one. Lenders will take an in-depth look at your finances including your credit score and credit history. If your recent financial history isn’t in the best shape, take time to fix it prior to applying for home loan refinance.
Generally, lenders are more amenable to offering borrowers lower interest rates and better terms if they have good creditworthiness. This means having a high credit rating, healthy credit history, and strong finances with sufficient income and minimal debt.
Don’t apply for multiple home loan refinances
It may sound like a good idea to apply to different lenders and see which one can give you the best deal. But all that will do is lower your credit rating and flag your credit history as suspicious. If you want to get the best deal on your loan, you need to do your research.
List down what you’re looking for in a home loan refinance and start from there. You can easily narrow down potential lenders when you know what you’re looking for. Call the lender directly or speak with a lending specialist to know more about your home loan refinance options.
Compare home loan refinance options
Finding the best home loans for refinancing can be difficult. Not all home loan refinance options are made the same. Some may be more suited to your situation than others. The key is doing your due diligence to find one that can help you achieve your financial goals. Use an online refinancing calculator to help you compare your home loan refinance options. This simple tool can give you a better understanding of your choices so you can make an informed decision.
Beware of advertisements offering deals that sound too good to be true. Usually, loans that promote rock-bottom interest rates usually come with exorbitant hidden fees. You should also read the terms and conditions of potential home loan refinance deals, so you know if there are certain restrictions.
Prepare for any additional fees
Refinancing your home loan could come with unexpected costs. Always review your existing loan agreement carefully and take note of what fees you may have to pay when you exit your current mortgage. Usually, you have to pay break off costs and/or discharge settlement fees to your current lender.
You should also consider refinancing costs like the application fee, property valuation fee, settlement fee, lender mortgage insurance (if applicable), monthly fees, annual fees, and the like. Accounting for these additional expenses can give you a better idea of the true cost of refinancing your home loan.
Decide if you want to consolidate your debt
When you refinance your home loan, you could consolidate other outstanding debt into the refinanced mortgage mortgage as long as you have the equity available. Some borrowers opt to combine all their debt to save on interest. It’s also a good way to make repayments more manageable. Instead of paying multiple loans, you’ll only be paying off one.
Before consolidating your debt, review the relevant loan agreements to ensure the break costs don’t outweigh the benefits. Use an online borrowing power calculator to see how much you could potentially borrow when you take out a home loan refinance.
Gather all the needed documents early
You’ll need certain documents to apply for home loan refinance which include but aren’t limited to:
- Personal IDs (driver’s licence, passport, birth certificate, etc)
- Proof of income
- Proof of employment
- Proof of savings
- List of existing loans and liabilities
- List of current assets
Home loan refinance applications typically get delayed due to missing requirements or lack of documents. If you want to hasten the application process, it’s best to get all the needed documents ready.
Looking to refinance your home loan?
At loans.com.au, we have a range of refinance options for you to choose from. Let our friendly lending specialists help you find one that suits your needs perfectly. Get in touch with us or apply online today!
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
