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  • Nicholas Kew

How to Refinance your Australian Home Loan?

Updated: Jan 31, 2020


Important Matters to Consider Before a Refinance

It may sound attractive when interest rates fall, and you may not pause to consider if this makes most financial sense. Often it does, however, interest rates are just one portion of a bigger picture.


Benefits of refinancing

Re-applying for a new loan may be a hassle, however, these are some good reasons to why you should consider refinancing your investment property:

  1. Lower monthly payments. This helps you to free more of your monthly cash flow if you plan to maintain your investment property long enough to breakeven on refinance costs.

  2. Shortening the loan term. You plan to repay your mortgage in a shorter time period in exchange for a small increase in monthly payments.

  3. More cash for investing. Many investors benefit from the lower interest rates mortgage carry to invest at a higher rate of return.


Drawbacks

Re-consider your refinancing strategy if you are only focused on these absolute results:

  • Always leads to cost savings. Most cases refinancing does save costs, however, increased cash flow from smaller monthly repayments for higher yield investments, or a shorter-term might appeal to you too.

  • Longer-term. Consider opportunity cost, a lowered repayment might allow you to invest in a new investment or whatever your financial goals.


How much does refinancing cost?

Refinancing your Australian mortgage does not mean just switching your existing terms for a lower interest rate or better terms. Refinancing is the process of applying for a new loan to repay your existing loan and additional fees.

  • Early exit fee (closing costs)


Depending on your mortgage terms, it may include an early repayment charge if you change lenders when you are still obligated to maintain a loan with your existing lender. The most common time to refinance is when your fixed or discounted rate comes to an end. To learn about when this term ends ask your solicitor if they can help you avoid this charge.

  • Broker fees (*if applicable)

  • Valuation fees


Your lender will need to value your property to check the difference in value from when you first took out your mortgage. This is so they can lend you the right amount of money and make sure it’s secured against the real value of your property.

  • Legal fees


Regardless if you’re buying, selling or remortgaging a property, you’ll need to appoint a conveyancer or solicitor.


How to refinance?

  1. Speak to a broker

  2. Get your documents together

  3. Submit your mortgage application

  4. The lender values your property

  5. You get a mortgage offer from the lender to confirm your mortgage has been approved

  6. A solicitor handles the transfer of deeds from one lender to another

  7. Your mortgage is complete

  8. You receive a letter from the new lender confirming your mortgage has been transferred, and that they’ll start taking new payments

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