How to successfully refinance your home loan
6 September 2019
There’s several reasons you may decide to refinance your existing home loan. Perhaps you’re looking for better customer service or a lower rate, or you want to purchase an investment property.
Whether you’re looking to stay with your existing lender, or you’re thinking of changing to a new one, refinancing has its advantages. However, the process can be a little tricky. Before you jump to a different home loan, it’s worth knowing the ins and outs of the process to make sure it goes as smoothly as possible.
Refinancing your home loan: Why it can make sense
A better interest rate
Lenders will often reserve their best interest rates for new customers. If you’re thinking about refinancing, do your research and find out what the most favourable going rate is. You may also want to ask your current lender what they can do – simply asking could help you negotiate a much better deal.
Don’t forget to consider the advertised comparison rates. A comparison rate will tell you a loan’s interest rate in addition to the other costs and fees involved, where the headline interest rate only takes into account the interest rate itself.
Greater equity for investment or renovations
Refinancing your home loan can give you more flexibility with your finances. Moving to a different loan structure could free up funds to help you renovate or invest the equity you’ve built up in your existing property.
Renovating your home or purchasing an investment property can help to shore up your financial future, but both choices come with additional costs and risks. Make sure to discuss your plans with a financial advisor before committing to anything.
Refinancing may also present opportunities for debt consolidation. If you have multiple debts, consolidating them is a way of simplifying your finances by rolling them into one loan.
This may be useful if you have weighty credit card debt – your home loan interest rate is likely to be much lower than that of your credit card. It’s important to bear in mind that while debt consolidation can make it easier to repay your loans, you’re still required to pay back what you owe. So, if you roll your credit card debt into your home loan, you could be paying it off over the term of the loan. If your home loan spans decades, it could potentially cost you more in interest repayments.
It’s common for people to stick with their existing lender, with many borrowers keeping the same loan for years. Having a candid conversation with your current or potential lender about refinancing is a great way to test the waters. Suncorp Bank offers many features across a range of loans. Plus, you could receive a cash bonus up to $3,000 when you refinance to an eligible Suncorp Bank home loan.*
*$2,000 for refinanced loans $250k-$749k. $3,000 for refinanced loans >$750k.
Excluding Suncorp loans. Apply by 30/09/2020, settle by 29/12/2020. Further T&C’s and eligibility criteria apply. To approved applicants only.
So you're thinking about refinancing. It can be a good idea if you've had your home loan for a while and want it to work harder for you. Perhaps you're looking to renovate your home or invest in property. You might need to consolidate multiple debts into one or you might just be after a better deal.
Let's look at the value of refinancing. If you've had your home loan for a few years now you may find that you're paying higher than average interest. That's because as interest rates rise and fall, banks tend to offer their better rates to new customers. It's worth comparing your existing loan rate against others in the market and using an online refinance calculator to work out how much you could save on a lower rate. Don't just compare the headline rate but also the comparison rate as that incorporates relevant costs and fees. Check out Suncorp's refinance calculator at www.suncorp.com.au.
As you pay down your home loan or as the value of your property rises, you gradually build up equity in your home that's the part of the home that you own. And depending on your loan arrangement that equity may be tied up in the loan refinancing can give you the opportunity to access that equity and use it for other purposes like renovating or investing perhaps it's doing up that old bathroom. Adding an extra room or even buying an investment property to help improve your long-term financial security.
Or if you're feeling the pinch of multiple debts such as a home loan, credit cards and personal loans, you may benefit from consolidating everything into one home loan. That means your entire debt can be paid off at your home loan interest rate which is typically much lower than other forms of debt. One catch is that while you may pay less interest in the short term, if your home loan spans decades it could potentially cost you more in total interest over the long run, so ask a lender or a broker to help you crunch those numbers and find the best way to manage your debt and discuss if refinancing could work for you.
Helping you get the most out of your home loan. That's the Suncorp spirit.
1. Check in on your current home loan
The first step in refinancing is to check in on your current home loan. What do you like about it? Or, more importantly, what don’t you like about it? Understanding these things will help you to identify whether it’s the best home loan for your current situation, and whether you should choose to refinance or not.
2. Compare mortgage lenders and fees
Once you have a better idea of what you’re looking for in home loan, it’s time to compare different lenders and fees.
A useful starting point is to consider what your financial situation will look like in a few years’ time. You’ll need to keep in mind the costs associated with refinancing and determine whether a new rate will be cheaper for you over the life of the loan.
There are several other elements to keep in mind when comparing different lenders, including:
- Customer reviews and ratings
- Special features or offers
- Comparison vs advertised rates
- Estimated monthly repayment
If you’re unsure about whether refinancing is a good option for you, talking to a financial planner or mortgage broker could help clarify things.
3. Apply for the new home loan you’ve decided on
Once you’ve decided on a home loan that’s right for you, you’ll have to apply for it.
What you’ll need to provide in your application will be different depending on whether you’re refinancing with your existing lender or a new one. Your current lender will have your information on hand, however a new lender will not. If you’re applying with a new lender, you’ll need to provide all your personal and income details, along with any other debts and your credit history. Since you’re applying for a new loan, the lender will need to assess you for serviceability – they need to be sure you can afford your repayments.
Following the pre-approval of your new home loan, your lender will assess the value of your property. If you’re changing lenders, this is the stage where they’ll contact your current lender to arrange a transfer. You’ll also need to pay any exit fees for your new loan to be finalised.
Finally, your new home loan contract will be sent to you as part of your mortgage documentation. Once you’ve signed and returned your contract, your new loan is ready to be settled.
If you’d like to find out more about refinancing your home loan, Suncorp’s expert Mobile Lenders can answer any questions you might have. Get in touch today for an obligation-free consultation to better understand whether it could be right for you.
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*In addition to the conditions listed, the Refinance Cash Bonus Offer is only available when you are approved for and settle an eligible home loan with Suncorp Bank. An eligible home loan is a loan that (1) is for personal/owner occupied or investment purposes (2) Loan to Value Ratio (LVR) must be less than or equal to 90% inclusive of Lender’s Mortgage Insurance (3) excludes lines of credit or refinance of existing Suncorp Bank home loans (4) pre-approved loans must be fully approved by Suncorp Bank by 30 September 2020 (5) where total refinance amount to Suncorp Bank is (i) between of $250,000 – $749,999.99, a payment of $2,000; or (ii) where the total refinance amount exceeds $750,000, a payment of $3,000. Limit of one payment per borrower regardless of the number applications which may be eligible. If there is more than one individual borrower, only one payment will be made to them jointly. The payment will be credited to a Suncorp Bank transaction account in the name of all borrower/s only within 30 days of the settlement date. Suncorp Bank reserves the right to vary or withdraw all Offers at any time.
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product.