Changing Home Loans
Changing your home loan should not be done lightly as there are considerable costs involved but with the great array of home loans on the market today there is also much to be gained if done right.
There was a time when you went to talk to your bank manager about buying a house. He would listen to what you had to tell him and then he would evaluate your worthiness. If all went well you would eventually get to the point where you signed on the dotted line and soon after you were handed the keys. You lived in the same house for the rest of your life and you kept paying the same mortgage off for about 20 to 30 years. It was a simple life and most mortgages were much the same.
Today its a much different story. New and better features are continually being thought up to make one mortgage document better than another and the competition between lenders is prolific. This means that refinancing a home loan has become an industry in itself.. Not many home owners today will live their lives out with the same home loan they started off with.
Changing home loans is to be given serious consideration when seeking to gain the benefit of lower interest rates or to obtain access to better benefits that your present home loan can not give you, and if the costs can be kept to a minimum most mortgage holders will find the exercise quite a simple process as after all, you have been through it all before.
What happens when you change your home loan.
Changing home loans is nothing more than taking out a new loan on your home and using the new funds to pay out your existing mortgage in full. Any money in excess of the pay out figure can be yours to do what you like with or it can be paid back into the new loan to give you increased equity in the property.
Before taking out a new home loan with another lender it is often advisable to approach your present lender first to discuss your intention as most lenders are able to refinance at a better rate, or deal, themselves if pressured. After all, you are a known and proven customer who he will most likely not want to lose.
Reasons for changing home loans.
There are many reasons for changing home loans, all give you added benefits in one way or another.
The following reasons are the most common:
- You might need to access the equity you have in your existing home loan to pay for renovations that will enhance your own living conditions as well as further add to the value of your property.
- You may want to consolidate your debts by absorbing them into your new home loan and taking advantage of the cheaper interest rate available.
- You may want to gain the financial advantage of accessing a lower interest rate that will give you more money to yourself each month.
- You may want to buy a new car or boat but don’t want to take out another personal loan to do so.
- Perhaps the loan you presently have does not allow additional funds to be paid into it and you want a loan where you can place your bonuses from work, or even your taxation refunds, so that you can pay off your loan earlier – therefore saving considerable money in the longer term.
- You may want to switch from a fixed interest rate home loan to a variable interest rate home loan so you can access improved features such as a line of credit.
- Then again, you may want to change from a variable interest rate home loan to a fixed rate home loan to ensure your required repayments will remain stable over a certain period when you don’t want to risk a lesser cash flow through rising interest rates.
Changing home loans – costs and fees.
Some lenders have been charging up to $1,000 above all the other costs involved in changing home loans just to allow you to exit your existing mortgage. But this is about to change because from July 1, 2010 the Australian Government will require lenders to justify making such charges.
In the past the earlier you tried to exit one loan to enter a new one the more it cost the borrower. This additional cost effectively prevented many from making the change and therefore had to put up with a loan that cost them more than it should have and had fewer benefits.
Other costs to consider are:
- Stamp duty (especially if you are planning to borrow a greater amount than your previous loan).
- Legal expenses.
- Property valuation.
- Establishment fees for the new loan.
- New mortgage registration fees.
Related posts:
- Home Loan Refinance Rates
- Changing Property Ownership
- 100% Home Loans
- Is Refinancing Worth it
- Mortgage Refinance
- Line of Credit Home Loans
- Home Loan Exit Fees banned on new variable rate home loan
- Beat Home Loans
- Refinance Deals
- Home Loans for the Self Employed
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