The RBA cash rate hike has gone up again, at the time of this writing. We haven’t seen this much growth spurt in more than 10 years — is refinancing a home loan finally the main thing to do again?
More and more homeowners with mortgages are getting worried about possibly paying more on their mortgage than necessary. A lot of others are also on the brink of their “mortgage cliff” and are looking to refinancing home loans to find a better deal.
Before you jump the gun, what is refinancing, and how does it factor into the Australian real estate market? Keep reading to get answers to all important questions on what to know about refinancing mortgage.
1. How does refinancing work?
How refinancing works is that it involves replacing an existing home loan with a new one, typically to obtain better interest rates, lower monthly payments, or improved loan terms. The process involves comparing loan options, applying for the new loan, providing required documentation, and settling the loan.
2. How long does refinancing take?
I guess the real question is “How long does settlement take when refinancing?”
The settlement period for refinancing a loan can vary depending on factors such as the lender’s processes, documentation requirements, and the complexity of the loan. Typically, settlement can take between two and four weeks.
3. When should you consider refinancing your mortgage?
You should consider refinancing a home loan if you are not confident that the rate you currently have is still the best one for your circumstances. You can also opt for home loan refinancing when your credit score has improved, your financial circumstances have changed, or you want to switch to a different loan type or lender.
4. Do you pay stamp duty when refinancing a home loan?
No, you do not typically pay stamp duty when refinancing a home loan in Australia. However, if you are increasing your loan amount, you may be required to pay stamp duty on the additional amount.
5. How much will refinancing cost?
The cost of refinancing home loan can vary depending on factors such as the lender’s fees, valuation fees, legal fees, and exit fees from your current loan. Typically, it’s going to be around $900 – $1,300. Compare different loan options and factor in these costs.
6. How much will I save by refinancing a home loan?
Refinancing home loan rates are typically better especially when you switch to a new lender (beware of loyalty tax!) As to how much you can save by refinancing, it depends on factors such as your current loan terms, interest rates, and the new loan terms.
For example, if you have a $400,000 loan with an interest rate of 4% and refinance to a loan with an interest rate of 3%, you could potentially save $4,000 per year on interest payments
7. What is the benefit of refinancing?
The benefits of refinancing include potentially reducing your interest rate, lowering your monthly payments, improving your loan terms, accessing equity in your home, and consolidating debts. Refinancing a home loan can potentially save you money over the life of your loan and improve your financial situation.
8. How to avoid LMI when refinancing?
To avoid paying Lenders Mortgage Insurance (LMI) when refinancing, you may need to have a deposit of at least 20% of the property’s value or provide additional security such as a guarantor. If you have sufficient equity in your home, you can also avoid paying LMI this way.
9. Do I need equity when refinancing home loan?
Having equity in your home can be beneficial when refinancing as it can potentially give you access to better loan terms, such as lower interest rates and higher borrowing capacity. However, it is possible to refinance without equity, particularly if you are consolidating debt or improving your loan terms.
10. What is cashback refinancing?
Cashback refinancing is a type of refinancing where a lender offers a cashback incentive to customers who refinance their home loan with them. The cashback amount is typically from $2,000 – $6,000 depending on the lender and the loan amount being refinanced. This can be used to cover the cost of refinancing (typically around $900 – $1,300) or for anything you like, it’s cash into your bank account and can be used to cover expenses such as exit fees or moving costs.
Refinancing a home loan with Q Financial
Ready to take back control of your mortgage? Don’t hesitate to reach out to me and my team. Click a button below for a FREE, no-obligation consultation so we can help you determine if refinancing your home loan is right for you.
