Refinancing your home loan every 18-24 months is key to staying aligned with the market and optimising your loan terms. Understanding this process can be complex, but it’s crucial to regularly assess and potentially save on rates, repayments, and even cash out equity for debt payments or investments.
Starting the Refinance Journey
When considering refinancing, engaging a mortgage broker is an optimal first step. Our brokers assess your current loan, interest rates, and features, seeking better deals from your existing lender or others aligned with your needs. These professionals possess key relationships to secure enhanced loan features tailored for you.
Crucial Questions to Answer
Successful refinancing requires collecting comprehensive information. Your broker should delve into key aspects such as:
- Fixed or variable interest rate preference?
- Principal and interest repayments?
- Property type and equity?
- Loan balance and exit fees?
- Monthly loan fees and repayments?
- Additional debts impacting your financial scenario?
- Considerations for debt consolidation
- Determining Refinancing Feasibility
Calculating your Loan Value Ratio (LVR) is crucial. With an LVR below 80%, refinancing avoids costly fees like lenders mortgage insurance or higher rates. Additionally, assessing your ability to service the loan is fundamental. Here is a quick video for you to help explain.
Fixed Rate or Variable Rate: Which is Best?
The decision between fixed or variable rates depends on market trends and personal preferences. Consider equity, lending criteria, exit fees, fixed rate duration, loan terms, and the need for offset accounts when contemplating fixed rate loans. A non exhaustive list of things to take into consideration are:
- How much equity do you have in your existing property ?
- Do you meet the lending criteria ?
- Is there a valuation fee or exit fees ?
- Are there early repayment fees and/or can you pay the home loan sooner ?
- What is the fixed rate period you want to choose ?
- What is the overall loan term of the home loan ?
- Do you need an offset account ? if so you may want to consider a split loan between a fixed rate and a variable rate.
Variable Interest Rates: A Viable Choice?
Expert advice is crucial here. Consider market conditions and your financial capacity to manage potential rate increases when opting for variable rates. Seek professional advice to navigate this complex decision effectively. Whether you opt for a fixed rate home loan or variable interest rate will come down to market conditions. E.g are the interest rates climbing? Are you close to the ceiling of the monthly repayments you can afford ? Do you have the means to “ride it out” until things stabilise?
These are all important factors to consider when you refinance a home loan. Contact us at sevag@roarcapital.com.au and we will arm you with the necessary information to make the right decision that suits your particular needs and overall financial situation.
Other Refinancing Options
For those indecisive about fixed or variable rates, a split loan—dividing it between fixed and variable rates—offers a balanced approach. This choice caters to volatile market situations, ensuring some level of security. For example, you can split your loan right down the middle and have 50% fixed and 50% variable, giving you exposure to both worlds.
Understanding Comparison Rates
When comparing lenders, look beyond interest rates to comparison rates. This rate consolidates all fees associated with a loan, aiding in effective lender comparison and informed decision-making.
Reviewing Investment Loans
Regularly reviewing fixed costs, even those associated with investment loans, is wise. Note, however, that lenders might offer varied deals based on loan amounts.
Other Refinancing Aspects to Consider
Debt consolidation: into your home loan and meticulous review of credit criteria and loan amounts are crucial aspects during the refinancing process. Making informed decisions here prevents future repayment issues.
Credit criteria: Use a broker to work out whether you meet the lending/ credit criteria to receive a loan approval.
Loan amount: working out the refinance amount to make sure that you are happy with the home loan amount and the loan term.
It is crucial that you get this right as the consequences if you don’t will be monthly repayments that you cannot manage or extra interest repayments that could have been avoided.
Take the Next Step
If you’re ready to explore refinancing options, our free preliminary home loan assessment compares loans from 40+ lenders. Contact us at sevag@roarcapital.com.au to embark on a tailored refinancing journey designed to meet your personal goals and objectives.
