Home Loan Refinance Hints
How Does Refinancing Work?
If you were to ask most people, how does refinancing work, you would get a number of different answers? Some would consider a refinance home loan strategy as a way to lower the home loan interest rate and monthly mortgage repayments, maybe lock in a low fixed-rate home loan in order to stabilize the repayments for an extended period. Or, refinance debt to consolidate other loans or get cash out to use for any other purpose such as home renovations, deposit for an investment property etc.
How Does Refinancing Work, is there a Right Time?
The home loan refinance process is much the same as what you would have experienced when you initially established your home loan.
Sometimes the question is, how do you know if and when you should do a home loan refinance?
Following we’ll review the most common reasons for refinancing. From this information, you can start determining what’s right for you with the help of your mortgage broker or loan officer.
One popular reason for refinancing is to do a low-interest loans comparison for the purposes of lowering mortgage repayments by searching for low-interest loans to get a better rate and/or extending the mortgage loan term, which can lower the monthly repayments.
Nonetheless, when the refinance process is undergone in any shape or form there will be some discharge as well as Government registration fees and the loan term will start over again, unless you request otherwise.
Another consideration is to refinance to a split home loan, where a percentage is fixed and the remainder is a variable rate.
How Does Refinancing Work For Cash Out?
What Is A Refinance With Cash Out? Last but not least, you can do a cash out refinance to get cash in hand by using a portion of your home equity.
This can be for varying reasons such as home improvements, pay off credit card balances, or any other worthwhile purpose including your children’s education, a new car or even a holiday.
Cash Out Refinance Summary of Useful Purposes When Undertaking A Refinance Process:
- Home improvements
- Cash out
- Deposit for investment property
- Consolidation of other debt
- Children’s education
- New vehicle
- Any purpose you choose really
A Cash out refinance allows access to the equity you may have built up or accrued in your property/s.
This equity can now be used to do a home loan refinance to borrow extra over and above what you may already owe (credit criteria does apply).
The question may be, how much can you access as cash-out?
This can in most instances depend on which lender you’re with, what your borrowing capacity is and how much home equity you have.
Typically though most will allow a borrowing capacity of up to 80% of the home value without any questions asked, including anything you may already owe.
There may also be other limitations when you do a refinance with cash out that any given lender will allow.
This will be more the case if the loan amount requested is going to exceed the 80% Loan To Value Ratio (LVR).
Contact your mortgage broker if you have any concerns in this area for possible alternatives, they will be able to quickly give you the answers you need.
Keep in mind though that when you do a refinance with cash out request it doesn’t necessarily mean having to replace the existing mortgage with a new one.
Many lenders (not all) will do what is called a loan ‘Top-Up’, which simply means increasing the limit on your existing mortgage.
This will usually apply if you already have substantial equity in your home.
You can then use the extra money for your chosen purpose.
There will still be some costs involved in doing this and in most cases it is limited to a top up fee, the amount of which can vary from lender to lender.
The term of the loan doesn’t need to change but be aware that the amount of your regular repayment will increase.
Considering Refinancing? – A Mortgage Broker
Refinance Specialist Will Save You
Talk to your mortgage broker to assess the consequences of what a cash out refinance will mean to you.
A mortgage broker can also show you the many options available from a wide range of lenders and also keep you informed of how the refinance process works. Also, keep you update on terms and conditions that are applied by the various lenders for cash-out refinancing.
When considering a mortgage refinance keep the following in mind.
Probably the most popular reason for refinancing is, shopping for low interest loans in order to reduce the monthly repayment.
Also, to save money by switching from variable rates to fixed interest rates, or cashing out a portion of the homes equity.
The refinance home loan process summary:
- Setting up lower monthly repayments by changing to a lower interest rate or extending the loan term
- Paying less interest over the life of the mortgage by shortening the loan term
- Switch from variable interest rates to fixed interest rates while home loan rates are low
- To access cash from a portion of the remaining home’s equity for any worthwhile purpose
- Investigate all refinancing costs to ensure it’s worth your while
- Research the long term consequences and solutions of a refinancing plan
Prior to undertaking the refinance home loan process, it is important to thoroughly research what is involved in the way of refinancing costs and any other financial consequences that can occur with a home loan refinance.
Contact the best mortgage broker in your area and they will be able to analyze your refinance strategy and give you a detailed report of what you can expect in the way of outcomes.
Check Out These Other Helpful Pages: