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Refinancing Melbourne

Refinancing is the process of taking out a new mortgage to pay out the existing one; usually because there has been a change in your personal or financial situation or because you want a better deal on your home loan. This can be with the same lender or a different lender.

You can take advantage of lower interest rates. You can switch to a more affordable, longer term payment plan. You can also take out cash from the equity you have built.

The Interest Rates

A difference in just a few percentage points can lead to an overall repayment difference of tens of thousands of dollars.

Interest rates on home loans are affected by a wide variety of factors, but the most important is the official cash rate, set by the Reserve Bank of Australia. Home loan rates tend to move when the cash rate does – a raised cash rate sees lenders raise their rates.

Your Property’s Value and Equity

Building equity in your home is helpful when refinancing as the equity can act as a deposit. Equity of less than 20% in your home could mean that you need to pay the LMI.

The equity is the difference between the value of your home and the amount still owed on your loan.

The Costs of Refinancing

Fees can include application fees, valuation fees, discharge fees and more. If you’re on a fixed home loan with your current lender, you may need to pay a break fee which could be a few thousand dollars.

A good way is to compare how much you’re currently paying with the total savings you would make on a new loan inclusive of fees. Read the terms and conditions of your loan or just ask your lender what each of the associated fees are.

Costs of Refinancing

Download Our Refinance Guide

    Your Credit Rating

    Refinancing is considered a credit application, meaning it depends on your credit score. If your credit score is low, you might find it working against your efforts to refinance. Rejected finance applications can also negatively affect your credit score, so firstly find out if you qualify for a loan.

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