MAINTAINING A HOME
How much equity do I need to refinance a mortgage?
5 October 2020
Here’s a good starting point towards answering this question: find out if the amount of your new loan will be under 80% of the value of the property. That way you can avoid paying mortgage insurance.
Mortgage insurance is a one-off cost that’s added to a mortgage when the loan amount is more than 80% of the property’s value (lenders call this your “Loan to Value Ratio” or “LVR”).
The amount of equity needed when refinancing may vary between lenders and loan types, so talk to your lender for more specifics about what could be right for you.
Some good news: you may have more equity than you think
If the value of your home has appreciated, it could mean your LVR is under the 80% threshold.
Talk to a local real estate professional to get an expert valuation. Banks will generally need a valuation as well when reviewing your refinancing application.
If you already have a good sense of your home’s current value, try using Suncorp’s Refinance Calculator to see what kind of refinancing savings you might be able to get.
Refinancing is a numbers game, so be sure to look at all the costs
We spoke to Cameron Selwood, a Senior Lending Manager at Suncorp Bank’s Carindale store.
Cameron advises potential home refinancers to, “compare all the costs…the costs to leave your current home lender, any Government costs and any set up costs with Suncorp Bank.
“In addition to these costs, we look at what interest customers would pay over their current remaining loan period compared to the interest they’ll pay coming to Suncorp Bank.
“If the customer isn’t coming out ahead, we’ll make sure they understand this. If they choose to proceed anyway, we’ll work with them to help ensure they’re making the best possible decision. Sometimes people have reasons for wanting to change lenders, but the last thing we want to do is put someone in a worse situation.”
If the sums work, refinancing costs can be financed too
Cameron also looks at whether the customer can come out ahead, even if they’re not able to cover the costs of refinancing up front.
If the numbers add up to the customer’s benefit, these costs may be able to be added to the new mortgage.
“For example, the other bank may charge a $300 home loan exit fee and the Government may charge $390 in fees. That extra $690 could be added to the loan.” So you don’t necessarily need to dip into your savings in order to start saving on your home loan every month.
Ready to take the next step?
To find out more about whether you could save through home loan refinancing, talk to one of of Suncorp Bank’s home lending specialists. Request an obligation-free consultation to find out whether refinancing could be right for you.
Cameron Selwood is Lending Manager at Suncorp Bank's Carindale, Queensland store. He has more than 17 years of home lending experience and he's passionate about helping customers achieve their home ownership dreams.
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