Refinancing your home loan is a big decision that can affect your long-term financial position, so it’s important to make sure you’ve covered everything you need to know before taking that step.
It is important to consider why you’re refinancing. Many people look at refinancing in order to save money or pay off their home loan faster. Whether it’s a lower interest rate that is appealing to you, reducing your regular mortgage payments, consolidating other debts or signing up to a different term, it can be worthwhile.
If you are considering switching, here is what you may need to know.
Reviewing your current lending
Many home owners think that once a mortgage is locked in, there's little room to move. In actual fact, you can always speak to your current lender to see if changes can be made to your existing loan. Reviewing your current lending is critical in ensuring you’re getting the best value for your money.
Now might be the right time to review your long-term financial decisions to ensure you are on a good rate. If you have a home or investment loan with another bank it's well worth reviewing your current position to ensure you’re getting the most out of your money.
Consider offsetting your loan
Whether you want to live in your property or rent it out, we’ve got a range of home loans available to you.
You could consider loans with a transaction account attached – this is called an offset account. The balance in your account is subtracted from your loan balance prior to the interest being calculated, so the more money you have in your offset account, the less interest charged on your loan.
You can also have multiple offset accounts to separate your living and other expenses. That way you can pay for food and bills from one account, but still save up for your holiday or annual bill payments from another account.
The main tip in this environment is to be a good money citizen to ensure bills and debts are being paid on time.
Carefully calculate the costs and benefits
While getting a better deal can be appealing, it’s important to do some careful calculations to make sure it really is saving you money or time off your mortgage. For example, if you’re opting for a new mortgage with lower monthly payments, work out whether this is helping you get closer to paying off your debt.
Here are some points you may want to consider:
- If you’re looking at a lower interest rate, make sure the home loan doesn’t have fees attached to it that will end up costing more in the long run. Your Mortgage Magazine recommends making sure any refinancing fees can be recouped within 12 to 18 months, in order for it to be considered a good deal.
- Look beyond honeymoon or introductory interest rates. Do your calculations based on the long-term interest rate for a true reflection of potential savings.
- If you’re switching from a variable rate to a fixed rate (or from fixed to variable), consider whether this is a wise decision for your current and future circumstances.
- Find out if you will you have greater access to your home’s equity if you refinance.
- Talk to your current lender to find out if they can reduce your interest rate, which may save you from refinancing.
- Ask your current lender if there are any early termination penalties or break costs attached to your existing loan when you refinance.
Recent changes to assessments of credit cards
When a person applies for a credit card banks have to assess whether the customer can afford to repay the credit card without any financial difficulties.
The Government has introduced changes to the way in which banks make this assessment. Firstly, the bank must be satisfied that the customer can repay the credit card limit at its interest rate within three years.
You may not realise it, but this can affect your borrowing power to purchase a property. Always ensure you review your debt commitments on credit or car leases and reduce or payout debt as early as possible.
If you’re applying for a new home loan, or refinancing, you’ll be asked for a range of information, including your credit card statements.
Apply with your new lender
If you’re refinancing with a new lender (as opposed to refinancing with your existing bank), you’ll need to go through the full home loan process with them, including providing proof of income, personal details, house valuation, and asset and liability details.
Documents you will need when going applying to refinance include:
- Completed and signed application form
- Last 2 PAYG payslips
- Last 3 months of bank statements for the main transactional account & the loan being refinanced
- Last 3 months of statements for credit card
- Certificate of currency – building cover
- Copy of your driver’s license and passport
If you’re considering refinancing, join a bank that’s run to benefit you and take advantage of the competitive home loans rates, award-winning products and personalised service that Australian Unity offers.
- We are here to help if you’re looking to refinance or want a second opinion on your home loan.
- We reduced our interest rates by 0.25% pa on all open home loan products which came into effect from 24 March 2020.
- We reduced our 1 and 3-year Fixed Rate home loan for Owner Occupiers and Investors by 0.10% pa effective from 22 April 2020 for new loans.
- We’re open for business on interest only loans.
Ready to apply for your home loan?