Refinancing is the process that is replacing your existing home loan with a new one, either with your current lender (i.e. internal refinance) or through a different lender (i.e. external refinance). Usually the purpose of refinance is to effectively seek to make favourable changes to interest rates, loan limit etc.
When Do I Need to Refinance?
The interest rate of existing loan is high
If your current loan product interest rate is much higher than other banks, then you should consider refinance. In some cases, it is possible to reapply for interest rate discounts with existing banks, but banks generally place far less emphasis on existing customers than on new customers. Therefore, it is wisest for us to choose a bank with a lower interest rate, and there may be additional benefits such as cash rebates.
There is a need for funding
If cash may be needed in your short-term plan, such as buying a car, renovating a house, buying the next investment property etc, you can consider using refinancing to achieve your goals. If the money cashed out cannot be used temporarily, you can put into offset account, and there is no interest when it is not used. You can withdraw it anytime you need it.
Change ownership of property
If the house used to be a person's name and now you want to add the name of your partner, or vice versa, if the couple divorced and the joint house and loan need to be transferred to one person's name, then both situations need to be achieved through refinancing. Or if you would like to transfer the ownership of the property between person's name and company/ trust, it needs to be done via refinancing too.
Debt consolidation
If you have a large amount of debt under your personal name, such as personal loans, credit cards, car loans, etc., which is difficult to manage and has high interest rates, and monthly repayment pressure is high, you can consolicdate all your debts into your mortgage through refinancing to reduce the current debt pressure.
What Else Should You Look for？
It’s likely you’ll pay a discharge fee, whether you’re on a fixed or variable rate home loan. This fee is typically around $400. If you are on a fixed rate mortgage, you’ll need to pay break cost if you refinance before the end of your fixed term. But they may still be worth paying if the benefits of refinancing outweigh the fees.
Questions about refinancing? Have a chat with Moremore Finance, and maximise your refinance benefits.
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