Market conditions keep changing, and refinancing can be a step in the right direction for many borrowers.
Refinancing your home loan is similar to applying for a new loan; you’re looking for the best loan option available. That’s why you need a mortgage broker who can tell you the best way to refinance your mortgage and the right time to do it.
If you’re planning to consult a mortgage broker before refinancing, make sure you’re ready with a set of questions.
Top 10 questions you should ask your mortgage broker when refinancing:
1. Will refinancing benefit my current situation?
Good mortgage brokers can help you determine if refinancing is a good move for you. Depending on your goals, you can benefit from refinancing through:
- Cheaper interest rates
- Lower monthly repayments
- Consolidating debts such as credit cards and car loans into one monthly repayment
- Paying off your home loan sooner
- Accessing equity in your home for extra cash
2. Will there be any break costs? If yes, how much?
You’ll need to know if there are any break costs involved when refinancing. Normally, these costs apply if you break the fixed-rate contract and switch to a variable-rate home loan.
Break fees can be substantial, often over $10,000. You can estimate the break costs you might incur by using our break costs calculator.
3. Should I refinance to consolidate existing debts?
You may be able to save a lot of money and time by consolidating debts.
However, in some instances, consolidating could hurt your finances in the long run and you might end up making higher monthly repayments.
Ask your mortgage broker whether consolidating debts is the right option for you.
4. How much does it cost to refinance?
Refinancing comes at a cost. It’s better to have an approximation of the upfront fees before you refinance.
These costs may include:
- Upfront fees your new lender charges
- New loan application fee
- Fee for getting property value assessed
- Lenders Mortgage Insurance (LMI) if you have more than 80% of the purchase price owing on your refinance loan
- Stamp duty fees, depending on your state of residence
Note that many of these fees are usually added to your new mortgage. Mortgage brokers might also be able to negotiate with your lender to lower some of these fees.
5. Which lenders offer a refinance rebate?
Some lenders offer you money to refinance your mortgage with them. This is called a refinance rebate.
These offers usually don’t last long, which is why it’s best to ask your mortgage broker if you can benefit from an existing offer before it ends.
6. Will I be able to access the equity in my home?
Accessing equity is one of the most common reasons borrowers refinance. You could draw funds from your equity to:
- invest in property
- renovate your home
- consolidate your debts
The amount you can release depends on how much you owe on your mortgage and the property value. Your mortgage broker can tell you whether you have enough equity to release some and how much you can release.
7. Which lenders offer the best rates and/or minimal fees?
Asking this question will help you decide if you want to refinance with your current lender or move on to a new one.
Note that you might avoid refinancing costs by staying with your current lender. However, you may be able to negotiate a more favourable interest rate and access more features with a new lender.
Mortgage brokers act legally in your best interests. Through their relationship with many lenders, they’ll be able to assess your situation and give you the best options.
8. What features should I look out for?
Remember, it’s not just about the interest rate. Borrowers often look for lower interest rates when refinancing but don’t realise that loans with lower rates can sometimes cost them more.
Your mortgage broker will help you identify the best features of your loan options.
9. Should I go with a fixed or variable-rate home loan?
Choosing between a fixed or variable-rate home loan is quite the decision.
Your mortgage broker will be able to show you the pros and cons of fixing your interest rate by taking your situation into account.
10. How soon can I refinance and who will process the discharge?
It’s best practice to check the market for a more competitive deal often. Mortgage brokers receive regular updates from lenders about loan rates and features.
Your mortgage broker will be able to suggest the best time to refinance by considering your equity and the lower rates available in the market.
You’ll have to sign a lender’s discharge form to refinance your home loan. It’s a form that’ll notify your current lender that you’re refinancing your home loan to a different lender.
You can find the form for most lenders here.
After you’ve signed the document, give it to your mortgage broker and they’ll handle it for you.
Speak to a mortgage broker today!
Are you thinking of refinancing your mortgage but are swamped with the questions in your head?
Home Loan Experts’ brokers can answer them all!
Speak with one of our mortgage brokers by calling us on 1300 889 743 or filling in our free online assessment form.