Refinancing Your Home Loan – What You Should Know
Refinancing is the process of rearranging your loan and/or mortgage security documents. Whether you are looking at refinancing your home loan or looking to see how an investment property could work in your property portfolio, there are a number of things to consider. It is important to understand how refinancing works, and why you might undertake the process.
The reasons why you might undertake refinancing includes restructuring your loan facilities to better suit updated financial circumstances, taking advantage of better interest rates on offer with other lenders, or implementing a debt-consolidation exercise. You may have a credit card and consumer finance debt and a high-interest rate which could be consolidated into a loan at a much lower interest rate secured against your property.
What happens when you refinance?
If all you are doing is restructuring your loans with your existing lender, you will be able to do that without the need for legal assistance. Where your refinancing involves a new lender and your existing and new lending are both secured against your property, then your existing mortgage will need to replaced with an updated version.
Once you have agreed on terms with the new lender, the process comprises the new lender providing instructions to your property lawyers on preparing loan and security documents. We will then:
- Meet with you to complete the documents.
- Liaise with your existing borrower for a discharge of your existing mortgage.
- Obtain a repayment statement and attend the drawdown of the new loan facilities.
- Repay the existing mortgage.
- Register the discharge of the existing mortgage and the new mortgage.
Who should I refinance with?
If you are refinancing to obtain a better interest rate or new repayment terms, there will be no shortage of lending institutions happy to discuss your requirements with you and to provide you with a refinancing proposal. If you wish to do this yourself, then you will be rewarded by spending a few hours browsing the banking sites on the Internet. They all include interest-rate calculators, helping you work out what your new repayment rate and interest rate will look like.
Over the process of refinancing a mortgage, many borrowers find the assistance of a mortgage broker helpful. They have access to a wide range of lenders and the banks are very comfortable dealing through them. Often, brokers have negotiated preferential arrangements through the volume of business they do with banks, particularly in relation to obtaining contribution to costs.
How will my interest rates change?
As part of your refinancing, you wish to consider a mix of fixed and floating interest rates and a combination of facilities. Compare the difference between fortnightly and monthly repayments, as fortnightly payments can significantly reduce the time it takes to repay a loan. Finally, check to see whether your existing lender is prepared to revisit your current arrangements.
Understanding the cost of refinancing
There will inevitably be costs associated with changing lenders. Existing lenders will usually charge a release fee, there are Landonline charges for both your discharge and registration of a new mortgage, application fees to pay to the new lender, and legal fees to be covered. You should also check any early repayment penalties on your existing loans which may factor into your decision on whether to refinance or not. Check to see if your new lender will assist by way of contribution to your legal costs.
Refinancing your Home Loan with help from HomeLegal
We at HomeLegal are happy to assist you and provide advice on refinancing. We can point you in the right direction if you’re looking for a broker, prepare all necessary documentation, and attend to all Landonline formalities. If you are looking for advice, please get in touch. You can call on 0508 HOMELEGAL to speak to one of our lawyers for an obligation-free discussion about your refinancing needs.