Quick Guide to Refinancing your Home and Investment Loan.

Quick Guide to Refinancing your Home and Investment Loan

Refinancing Home Loan - Winthrop

As interest rates are nearing the end of their upward trend, and a potential rate cut is on the horizon, the prospect of refinancing your home and investment loans becomes more favorable. Considering home loan refinancing in the coming year, you must acquaint yourself with the entire process. Our concise guide provides valuable information to help you understand the critical aspects of refinancing your home and investment loans.

5 Steps to Take when Refinancing your Home Loan

When considering refinance as an option, there are certain steps that you need to take. They include:

  1. Determine the features you want in your loan. 

You have to think of the reasons as to why you want to refinance. The main reasons for refinance include:

  • To access equity
  • To get a lower interest rate
  • To switch to a different product presently not provided by your current lender
  • To consolidate a number of loans to one lender

Depending on your reason for refinancing, you have to think of the features that you want with your new loan. Determine whether you want to offset, split, redraws, etc in order to make more value out of your mortgage. Do you want a variable rate instead of a fixed one? Do you want to lengthen or shorten the loan term? All of these are the things to consider beforehand.

  1. Choose an ideal type of refinance option

There are two types of loan refinance options to choose from. The first one is the internal finance option, which involves switching your loan to a new one while staying with the same lender. The second one is an external refinance option, which consists in switching your loan from an existing lender to another lender.

If your current lender can offer the features you’re looking for, then internal refinancing might be an ideal option. If your current lender doesn’t provide the product you’re interested in or can’t allow consolidation of all your loans, then seeking external refinancing may be in order.

 

  1. Find the best deal on interest rates and cost. 

The whole point of refinancing is finding a better deal than you already have. So, you must compare the current home loan with other home loans. Once you find a home loan that seems like a good deal, proceed with the following vital step.

  1. Do the math. is the new loan beneficial to you? 

The interest rate is critical for comparing the old and the new loans. You may opt to refinance to get a lower interest rate. In this regard, there’s one piece of the puzzle that you must solve. You have to determine the effect the lower interest rate (promised by the new lender) has on the total cost of your new home loan. Remember, there are government fees and charges to refinance to another lender.

A lower interest rate may translate to lower monthly payments, but it doesn’t necessarily mean the new loan is cheaper. Therefore, checking whether the lower interest rate comes with a longer loan term is essential. This will prevent you from choosing a new loan that increases the total cost of your home loan.

If the total cost of your new home loan is lower than that of the current loan, you can consider yourself to have found a better deal. You can also compare your newfound discount with other arrangements to ensure that it’s indeed the best on the market.

 

  1. Explore the loan costs involved

Following the 2011 eradication of mortgage exit fees, borrowers are no longer obligated to pay penalties such as deferred establishment fees when refinancing. Nevertheless, there are other costs that you must explore beforehand. Depending on the new lender’s policy, specific fees may be applicable. Therefore, you must determine what upfront costs you must pay to establish the latest home loan.

Conclusion

The decision to refinance your home and investment loan should come after establishing that the benefits of the new loan far outweigh both the benefits of the existing loan and the costs of the new loan. Hiring a mortgage broker can be wise to ensure you choose the most ideal refinancing option.

Call a trusted and experience Mortgage Broker now

Morgage Kardinya