What Does Refinancing Mean?
Approaching the end of your fixed-rate term or looking for a better deal on your interest rate? Understand how the refinancing process works
Whether you’re approaching the end of your fixed-rate term or you’re keen to find a better deal when it comes to your interest rate, it can help to understand how the refinancing process works.
What is refinancing?
Refinancing is the process of taking out a new home loan to replace your existing home loan - this could be with your current lender, or with a completely different lender.
When should you consider refinancing?
The best time to refinance really depends on your individual situation – these may include:
- You’re on the hunt for a more competitive interest rate,
- You’re looking to access the equity in your home,
- You want to reduce the loan term or
- Your fixed rate is coming to an end
- You want to consolidate your debt
- You want to access better features with a different lender or home loan
How much can I save if I refinance?
A mortgage calculator can help you calculate your potential savings and give you an idea of what your new repayments could look like. Keep in mind:
- If your loan-to-value ratio (LVR) is less than 80% you may need Lenders Mortgage Insurance.
- You might also have to pay discharge fees to exit your existing loan
It’s important to run the numbers to make sure that it makes sense to switch.
What are the benefits of refinancing?
There are a number of potential benefits when refinancing your home loan including:
- Securing a lower interest rate
- Reducing bank fees
- Consolidating debt
- Tapping into equity
- Accessing new features
- Reducing your loan term
Learn more about the benefits of refinancing your home loan here.
What factors should I consider before refinancing?
Before you pull the trigger, there are a few key points to consider:
- Check your comparison rate
- Discharge fees with your existing lender
- Home loan features with your potential new lender
- Check your LVR
Learn more about how these factors here.
Want to know more about refinancing and how it works? See our six step guide here.
This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.
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