Refinancing refers to the process of paying out your existing loan by taking out a new loan with another lender. The property you are using as security is then remortgaged with the new lender. Choosing to leave your existing lender is never a simple decision, so we are here to
help you first determine whether refinancing is the right step for you (i.e. that the benefits will outweigh the costs), and then to guide you through choosing a new lender and making an application.
Quite simply, the only reason to consider refinancing is to get a better deal. This might just be a loan with a lower interest rate or fees, or you might need a change of structure or product to better suit your financial situation. It is important to review your loan regularly to ensure that it matches your needs as time goes on. As your life changes, your mortgage should change with you.
Please
contact us if you would like to review your loan.
Refinancing your loan can involve fees from both your current lender and your new lender, as well as government administrative charges to alter the mortgage lodged against your property. Most of the fees you will incur from your current lender will have been outlined in your existing loan contract with them, and should have been factored into your original decision to take out that loan.
See
here for a brief explanation of the costs you might incur when refinancing.
At Beyond Home Loans we do a thorough analysis of all of the fees and charges you are likely to incur with a refinance, allowing you to make an educated choice as to whether or not refinancing will leave you better off. Please
contact us.
Not only do you need to weigh the costs involved in refinancing against the benefits, but you need to be careful that a refinance doesn't extend the time it will take you to pay off your loan. The standard loan term is thirty years, meaning that your standard principal-and-interest repayments should pay off your loan in its entirety in thirty years. If you refinance your loan to a new lender, this usually resets your loan term to thirty years again.
As an example, let's say you took out a loan for $100,000 and paid off $5,000 of its balance in three years, leaving $95,000 owing. You then decided to refinance to a different lender offering you a lower interest rate. Not only will the lower interest rate reduce your payments, but if that new $95,000 loan is taken over a thirty-year term again (instead of the 27 years you had remaining on your previous loan), your repayments will be lower still, and it will take you three extra years to pay off your loan. That also means you will pay three extra years' worth of interest, which could undermine the savings you made by refinancing in the first place.
We therefore recommend that you try to continue making the original higher loan repayment from your previous loan, even if the minimum repayment on a new refinanced loan is lower. This way, you do in fact pay off your loan in the expected timeframe and don't pay any more interest over the years than you need to.
Please
contact us for more information.
Frequently asked questions