Refinancing Guide

The term ‘refinancing’ is bandied around a lot, but what does it mean? What are the benefits of refinancing, and is there a right time to do it? Your MoneyQuest mortgage broker can help to answer all of these questions and guide you through the process step by step, but we have covered the nuts and bolts below to get you started.

What does refinancing mean?

In basic terms, refinancing means changing home loans, usually with the aim of securing a more competitive interest rate and/or gaining access to additional home loan features. It usually involves taking out a new loan to replace and pay off your existing loan. It is possible to do this whilst remaining with the same lender, however some borrowers opt to move their mortgage across to a new lender when they refinance.

Why should I consider refinancing?

There may be a home loan product out there that better suits your needs and saves you money in the long run. Your MoneyQuest mortgage broker can compare the fees, rates, and features of your current loan with those of other products, and help you to switch loans if you decide that there is a better deal available. However, fees and charges may apply. There are several reasons homeowners typically choose to refinance their mortgages. One of the most common reasons is to access a lower interest rate. Paying less interest may help you to save a substantial amount of money over the life of your loan.

People also refinance to consolidate their debts. Rolling all of your debts – credit cards, personal loans, car loans etc. – into one mortgage can lead to a reduction in your monthly repayments, may give you access to an overall lower interest rate, and help you to save on fees, charges and paperwork. Plus, only having one payment to make per month, as opposed to three or four, can save you time, energy, and money. Streamlining your debt is also sometimes looked favourably upon by lenders and may broaden your home loan options.

Another reason people refinance is to gain access to the equity in their existing property, in order to borrow funds for another purpose i.e., a home renovation, an investment, to purchase a car or to finance an overseas holiday.

Is there a ‘right time’ to refinance?

There is no right time of year or prime environment in which to refinance as such, the ‘right time’ is more dependent upon each borrower’s personal circumstances, their finance goals, and the various

loan products on the market. If your loan is approaching the end of its fixed-term period for instance, you might like to consider refinancing before it defaults to what might be a higher than standard variable rate. Unplanned major life events may also prompt you to re-structure your finances. There is no ‘one size fits all’ formula, however any time is a good time for a home loan health check, because, well, what have you got to lose?

What should I take into account before refinancing?

Before refinancing, there are several factors to consider. Think about how long you plan to continue living in your current home, and how much you are likely to save by refinancing. Also take into account the possible fees you may be charged throughout the refinancing process, such as loan establishment fees, discharge fees, application fees, registration fees, valuation fees and settlement/legal fees. It is important to ensure that any savings you may enjoy as a result of refinancing outweigh the associated costs. Also consider experimenting with our mortgage switching calculator to compare home loan products.

Keen to learn more?

We recommend reaching out your local MoneyQuest finance specialist for all of your refinancing needs. Our team has access to a wide range of lending options and can compare the fees, benefits, and features of various home loans to find the right product for you. Our brokers can also crunch the numbers on your behalf and weigh up the associated costs involved, to assist you with making an informed decision.

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