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Refinancing Your Home Loan In Australia

Jun 14, 2008
Lifestyles change and so do property loan products! You could be missing out on a great deal so book in for a regular Mortgage Choice property loan health check to make sure you still have the one most suitable for your needs.

Borrowers are becoming increasingly knowledgeable about the availability and benefits of using household equity to gain further assets or for debt consolidation, so refinancing continues to attract a large following as a market option.

The popularity of refinancing has been confirmed by the results of an Australian Bureau of Statistics report, showing approximately 25% of all property loans belong to consumers who have refinanced.

Reasons people use the equity in their properties to refinance can include:

Pay off a property loan faster and save on interest.

Accessing funds for renovating property.

Consolidating debts.

Buying an investment property, car or boat.

Taking a holiday.

Undertaking property improvements.

Buying shares.

Accessing funds for education; or

Simply looking at a cheaper property loan product.

The advantage of refinancing is to either obtain extra capital to invest in more assets, improve one's lifestyle through renovations or additions to an existing property, or to put all debts into one single loan. This can be paid off monthly usually at a lower rate of interest, and more importantly, provide peace of mind.

Despite the advantages of refinancing, there are many important factors to consider before deciding to refinance your current loan. For example, switching loans may incur costs such as exit or break fees, application fees, loan stamp duty, registration fees, mortgage insurance and account fees.

Your Mortgage Choice loan consultant will be able to advise an estimate of costs relevant to you and establish the benefits and savings of switching loans.

A number of borrowers stay with their original loan product but are happy they've checked the market before making that decision. This could be due to costs associated with changing products or by changing loans they may be restricting themselves from other loan features (e.g. extra repayments, offset accounts and redraw facilities).

Before you consider refinancing, talk to your local Mortgage Choice loan consultant who can:

Establish why you want to refinance.

Confirm the following aspects of your existing loan: current interest rate paid and type of rate (variable or fixed), ongoing fees on the loan account, what features are currently available e.g. redraw, offset, lump sum reductions.

Determine the costs of refinancing - it may be cheaper to keep the existing loan, rather than pay additional fees such as those above.

Decide what aspects of the loan are most important, i.e. do you want the cheapest loan no matter what? What features do you need as opposed to want?

Consider options from all types of lenders - the best option may be from a lender you are not familiar with.

Go over future requirements - how flexible will the product be if your plans change?

With the constantly changing market of lenders and products, together with individuals changing personal circumstances, it is recommended you undertake a free Mortgage Choice home loan health check every one to three years and seek professional property loan advice before making the decision to refinance.
About the Author
Kirsty Williamson works with Mortgage Choice in Ryde, North Sydney.

To determine whether you should refinance your existing home loan please visit Mortgage Choice Mortgage Brokers North Sydney
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