Frequently Asked Questions
What is refinancing? +
Refinancing lets you change your home loan to suit your new circumstances. Mortgage Choice recommends an annual Home Loan Health Check by your local Mortgage Choice expert to assess whether the original home loan you chose is still the most suitable option for you.
How does refinancing work? +
When you take out a new home loan, you use some or all of the funds to pay out your existing loan. The new loan often comes from a different lender, but many people refinance with the lender they’ve been using for years. If you move to a new lender, that lender will take care of paying out your existing loan.
Can I refinance my mortgage? +
Under Australian law, banks cannot force their customers to stay with them for the life of the loan. However, your bank may impose financial penalties for leaving (such as exit fees).
Mortgage Empire Loan Expert can review your loan for you and tell you what these fees and costs will be, and also what the “switch costs” associated with refinancing your mortgage will be.
In every case, we will make sure that if you choose to refinance, you will be financially better off under the new deal.
Should I refinance my mortgage? +
If you have had a home loan for more than two years (and particularly if your home loan is on a variable rate), then we strongly recommend you review your loan.
The chances are that you can negotiate a better rate and terms, either with your existing bank or with a new bank.
You may also want to review your mortgage when your financial circumstances change – for example, when you want to buy another property, or you have just had a baby.
One of our brokers can help you compare your loan against the products currently in the market, and determine how much you can save over the life of the loan (potentially tens of thousands of dollars).
When can I refinance my mortgage? +
There is no time limit on when you can refinance your mortgage. Theoretically, you can refinance the day after you take out your initial home loan.
In most cases, we find that borrowers can get better rates from refinancing with a new bank when their home loan is more than two years old. Banks tend to value new business far more than existing business, and will offer lower rates to attract new customers.
If you’re on a variable rate, your current bank has probably increased the rate over time, or failed to pass on rate cuts, so the rate you’re on is no longer competitive.
What type of things do people refinance for? +
Home loan refinancing may be used for different reasons including:
• Renovating your home or other home improvements such as a pool.
• Paying off your debts such as credit cards by rolling them into your home loan.
• Obtaining a cheaper rate, even if it means giving up a few loan features.
• To raise cash for a purchase such as a car.
• You want to switch from a variable rate to a fixed rate, perhaps because you can want to reduce the risk of higher repayments.
How will refinancing benefit me? +
Refinancing can be a smart way to manage your money.
Here are a few ways in which you may benefit from refinancing.
• Peace of mind – a fixed rate can mean knowing what your repayments will be each month
• Reduce your monthly repayments through access to a lower interest rate
• Potential to pay off your loan faster through more flexibility
• Reduce your monthly repayments overall by consolidating credit cards, personal loans or other debts into a lower rate loan
• Free up some extra cash to finance a renovation or purchase an investment property by unlocking equity in your current property
Your local Mortgage Empire Loan Export can step you through the process and work out how much equity you have to help you with making a decision.
What are my mortgage refinancing options? +
Just as there are literally hundreds of loan options available to you when you buy your house, there are just as many options available to you (and in many cases more) you when considering a refinance.
You should always investigate the market at the time you’re ready to refinance.
For expert advice, speak with one of our brokers.
What are the mortgage refinancing rates? +
Mortgage refinancing rates will differ from bank to bank, and rates and lending criteria can vary from week to week. Other factors that can impact rates are the type of loan, and your personal circumstances (including the equity ratios in your property).
It is important that you review the market at the time you want to change your financial arrangements. Contact Preston Finance & Insurance for advice and assistance.
Can I refinance a mortgage if I have bad credit? +
Bad credit may limit the options that are available to you, but it is in no way a barrier to you refinancing your mortgage.
Preston Finance & Insurance will help you source and compare your options. Contact us for a free consultation.
Should I refinance with interest rate rises? +
When the Reserve Bank of Australia (RBA) raises its interest rates, banks and other lenders usually follow suit by increasing your mortgage repayments. Refinancing your home loan from a variable to a fixed rate can provide certainty with your repayments.
Your local Mortgage Choice broker can perform a free Home Loan Health Check to see if your current home loan is still the most suitable option for you after an interest rate rise.
What do I need to consider when refinancing? +
When done properly under the right circumstances, loan refinancing can be very beneficial. However, there are drawbacks involved – namely the cost.
The reasons for refinancing should be legitimate and the calculations need to be run to ensure the long term savings outweigh the short-term costs.
What are refinancing cost? +
Lenders are not allowed to charge exit fees on loans taken out after 30 June 2011. If you took out a home loan before 1 July 2011, find out if your lender charges exit fees on your loan. However, lenders are allowed to charge loan discharge fee and legal fees, which will be detailed in your loan agreement.
If you are on a fixed rate loan, you may need to pay a break fee. You should also check the start-up fees on a new loan.