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With increasing competition amongst Lenders, many borrowers choose to switch their mortgage every few years in order to take advantage of the new rates on offer. Those that remain on the same deal for the full term of their loan could lose out on a range of potential benefits, not least the opportunity to reduce the total amount paid back, which could be a significant margin in some cases.
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Refinancing isn�t nearly as much hassle as most people think �
particularly with our help!. We discuss your needs,
then suggest lenders who will save you money or provide you with the
loan features you want, then we prepare your application details and
submit them for you. We stay with you right through until your
mortgaged has been settled.
In simple terms, refinancing involves switching your current mortgage to a new deal, arranged either with your existing lender or with a new lender. As a current homeowner you may want to consider taking this step for a number of reasons, such as:
For more information about refinancing your existing property:
Why switch your mortgage?
Which mortgage should you choose?
What steps are involved?
What are the costs?
What should I do next?
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Why switch your mortgage?
In today�s competitive market, many borrowers choose to switch their mortgage every few years in order to take advantage of the new rates on offer. Those that remain on the same deal for the full term of their loan could lose out on a range of potential benefits, not least the opportunity to reduce the total amount paid back, which could be a significant margin in some cases.
In simple terms, refinancing involves switching your current mortgage to a new deal, arranged either with your existing lender or with a new lender. As a current homeowner you may want to consider taking this step for a number of reasons, such as:
- To save money
If you�re paying your lender�s Standard Variable Rate,
it�s highly likely that your another lender may offer you a better rate and greater flexibility on
alternative available products. This could allow you to save money on your monthly repayments, or to repay your mortgage sooner.
- To raise money
An increase in your property�s value means you could increase your mortgage to help pay for
an investment property, renovations or a new car. This can
be a much cheaper alternative to a personal loan.
- To consolidate your debts
Refinancing can allow you to release some of the equity you hold in your home and consolidate other debts, such as a car loan or credit cards, which can attract higher rates of interest than that of your mortgage.
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Which mortgage should you choose?
When considering what kind of mortgage to switch to, you will want to consider the deals on offer to you and the relative advantages these present to your circumstances. Mortgages usually offer one (and sometimes more) of a number of �core� features, listed below:
- Standard variable rate (SVR)
Most borrowers are transferred to their lender�s SVR once their initial, promotional rate period comes to an end. This is usually the most expensive of their lender�s rates, and the rate from which many people choose to switch to a new product elsewhere.
- Fixed
A fixed rate loan charges a set rate of interest for a predetermined period, and then usually reverts to the lender�s SVR. This kind of loan offers you the security of knowing how much you�ll be repaying during the initial period, and can make budgeting much easier. But repayments may prove more expensive than a
honeymoon rate initially, and may also become uncompetitive later on, depending on how interest rates move over the period of the fixed rate.
- Honeymoon
A Honeymoon rate mortgage offers a reduction of a given amount on the lender�s SVR
and this usually lasts for between 6 and 12 months.
This usually reverts back to the SVR for a lock-in period of
between 1 and 2 years.
- Offset
Offset mortgages allow you to offset the balance of your mortgage against any funds in a savings and/or current account held with the same lender, and pay interest (calculated on a daily basis) on the net balance between the accounts.
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What steps are involved in refinancing?
Refinancing is much simpler than buying a new home because the deeds of the property are already registered in your name.
And if you do choose to switch to a new lender, only a few steps are involved. If you choose to remortgage with
Dr Mortgage, even these few steps involve minimal hassle, since we help manage the process by liaising with lenders, valuers and solicitors on your behalf.
- The lender will require a valuation to ensure the value of your property is sufficient for them to lend on. Property prices can fluctuate over a short space of time so that, even if you�re
refinancing a year after purchase, you could still see a change in your home�s value.
- You�ll be required to make an application to the lender in the same way as when buying a property. The application has to be underwritten by the lender, who will require evidence that the loan to date has been maintained. They�ll then issue you with an offer.
- You then sign and return the offer documents and the new funds are
released to you shortly afterwards.
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What are the costs?
Refinancing can involve less cost than those incurred when buying a property, since in most cases the following charges either won�t apply or will be lower than when you first purchased your mortgage, including:
- Government stamp duty - you won't be liable for this when refinancing
- Legal fees - In most cases, there are no legal fees
either. The lender pays the solicitor's costs to move your
mortgage from one lender to another.
- Transfer Costs � In many cases these can be as low as $200.
- other costs � Application fees are usually payable although
some lenders do not charge any. One valuation fee is usually
covered in the application fee.
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Who should not remortgage?
Many borrowers stand a good chance of saving money through refinancing. But there remain some cases where
refinancing is not a realistic option.
- Where you have large Early Redemption Penalties
If you have recently taken out a fixed-rate or discounted loan, you may find that early redemption penalties make it very expensive for you to take your loan elsewhere in its first few years. These penalties can stay in force long after the original fixed-rate or discount has run out.
- If you have a very small loan
Many lenders accept remortgage business only if the loan required is above a minimum level of about �25,000. Fees may also be a problem with very small remortgage loans, as these may outweigh the
saving on offer.
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What should I do next?
If you would like a professional assessment of your
options, we can put you in touch with one of Dr Mortgage's
consultants. Ask for our no-obligation
Refinance Check, which will help you to assess if you could benefit from
refinancing. If you could, our consultants will recommend the best product for your needs, from across the market. To contact
a mortgage consultant call us on 1300 65 33 65 or alternatively you can email us at info@drmortgage.com.au
or by just click here
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