With low interest rates and economic uncertainty ahead, many of our clients are thinking about refinancing their mortgages.
What is refinancing a mortgage?
Refinancing is the process of transferring your home loan from one bank to another. When you refinance, you’re essentially paying off your existing loan, then taking out a new loan at a different bank. Refinancing is sometimes referred to as re-fixing or restructuring, but these three are very different things.
What’s the difference between re-fixing, restructuring, and refinancing?
Re-fixing is the process of locking in a new interest rate for a certain period of time once your current term is up.
Restructuring is reviewing how your existing loan works. For example, is it floating or fixed? Or could you pay it off more quickly by off-setting?
Refinancing is when you switch your home loan to another bank entirely.
Common reasons to consider refinancing
There are several reasons you might want to look into refinancing your home loan, including:
locking in a more competitive interest rate
taking advantage of another bank’s products or services
reviewing your loan’s structure
or being able to borrow a larger amount.
It’s important to understand refinancing isn’t just about interest rates It’s also about the bigger picture, and the overall benefits.”
When is the best time to refinance your mortgage?
The best time to think about refinancing is towards the end of your current loan’s term, or when your financial circumstances have changed. Perhaps your income has significantly increased, or you’re looking to borrow more to buy a new house or investment property.
We recommend looking at the low interest rates which the bank are offering now. Some Banks may lock in a new rate up to 60 days before your mortgage rolls over.
You could consider holding out for a lower rate when your mortgage comes up for renewal.
Consider following reasons for refinancing of your mortgage: -
Reasons for refinancing
Always ask, why are you looking at changing. Are you unhappy with your bank? Do you want a better rate? Do you want to borrow more?”
Your goals might be better achieved by restructuring or re-fixing. It’s important to make sure refinancing is the best solution.
Explore the costs of refinancing
Refinancing a mortgage can come with costs. These costs can include:
early termination or repayment fees on your current loan
any cash reward clawbacks (when you have to return your cash rewards) from your existing bank
new house valuation fees – the bank will usually organise this for you, but you will be responsible for the cost.
We at Legal Associates are here to help for the refinancing, by offering the comfort and certainty of a fixed fee.