MAINTAINING A HOME
What's the difference between refinancing and getting a new home loan?
There are all sorts of reasons for refinancing your current home loan or applying for a new home loan. Exploring your lending options here can be useful if you’re looking to renovate, consolidate your debt or are just on the lookout for a better deal – and that’s just the tip of the iceberg.
But how exactly is refinancing a mortgage different to applying for a new mortgage? And which is the best option for you?
Refinance your mortgage or take out a new one?
The major difference between refinancing and taking out a new mortgage is the process. Refinancing a home loan usually involves shifting your current mortgage to another lender. On the other hand, applying for a new mortgage is something you might do with your existing lender.
Before you make any decisions, it can be useful to know what to expect logistically. For instance, the process of taking out a new mortgage with your lender could be faster, given they already have all the information they need from you. Whereas, switching lenders to refinance your loan could take longer.
What are the benefits of refinancing your home loan?
A better interest rate
Lenders may use changing interest rates to attract new customers, so it could be useful to shop around to seek out the best available rate (or even ask your current lender if they can give you a better deal). Be sure to compare the comparison rate rather than the headline interest rate. The headline interest rate only tells you the interest rate itself, where a comparison rate includes all the other costs and fees involved.
Fixed interest rates
Refinancing your home loan may enable you to fix your interest rate for a set period, protecting your loan against any potential rate increases. You might find that this is useful if you anticipate any large expenses in the short-term that could make higher repayments tricky. Keep in mind that most fixed loans only allow limited additional repayments – it’s best to check directly with your lender.
You may be able to pay off your loan sooner
If you find that your circumstances have changed throughout the course of your existing home loan, refinancing it may enable you to pay it off quicker if you reduce its term. If, for example, your income is greater than when you initially took out the loan, you may have the ability to make larger repayments. And by negotiating a shorter term on your loan, you’ll cut the amount of interest you pay over its lifetime.
If your home loan has been with the same lender for years, it could be time to refinance to get it to work harder for you. Suncorp Bank offers many features across a range of loans.
What are the benefits of a new mortgage?
You’re already on the books
A significant benefit of applying for a new mortgage through your existing lender is that they already know what they need to know about you. If you apply to refinance your mortgage with a new lender, you’ll have to go through the same process as when you applied for your existing loan. This includes providing them with proof of income, assets and the details of your living expenses.
Choosing to stay with your current lender could also lead to a reduction in the costs associated with refinancing, such as exit fees.
You can ask for a better deal
If you do some research and approach your current lender with the rates of their competitors, you may find they’ll reduce their rate to retain you as a customer.
Seek advice from a home loan specialist
Like any important money-related decision, choosing to refinance your home loan or get a new mortgage each presents their own advantages and disadvantages. The option that’s right for you will depend on your current financial situation and personal circumstances. Before reaching any conclusions, you may find it useful to talk to a home loan specialist.
Home Loans and Personal Loans are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Fees, charges, terms and conditions apply and are available on request. Please read the relevant Product Information Document before making any decision about a product. Contact us for a copy.
The information is intended to be of a general nature only and any advice has been prepared without taking into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.