How to Refinance a House
There comes a time during the lifetime of a housing loan when most borrowers give serious thought to refinancing their home loan.
When to Consider Home Refinancing
Interest rates payable on a variable rate home loan move up and down with the cost of money as determined by the Reserve Bank from time to time when attending to the needs of the general economy. Home refinancing can therefore be advantageous when interest rates are generally falling.
On the other hand a fixed rate home loan can protect you from rising interest rates for up to five years, when the loan has to be renegotiated at another rate or become a variable rate loan.
One of the most popular reasons for Home Refinancing is to allow the mortgage holder to use the equity in the house as security for a line of credit. In this manner high interest debts such as that used to finance:
- credit card purchases and
- personal loans
- can be rolled over into the one housing loan.
- allows for easier access to ready cash when needed most.
Are You Suited to Home Refinancing?
Home refinancing is best utilized when in an environment of low interest rates as a lot of the money saved can be used to pay more off the principal rather than have it swallowed up every month in interest.
There are certain risks involved in Home Refinancing. Some of these risks are:
- Penalty clauses. Fixed term home loans usually contain penalty clauses which in effect charges the mortgage holder a fee for early payment of the loan, be it a full payment of what is owing or a part payment.
- Closing fees. There are also closing fees to consider.
- Transaction fees. Fees that are normally associated with the refinancing.
It may work out that the cost in fees to partake in your home loan refinance could well be in excess of the savings you plan to achieve. It will pay you to do your sums thoroughly in this area.
The reasons are varied such as:
- Gaining the benefit of a lower interest rate that your particular lending authority refuses to pass on.
- It could be an effort to consolidate debt that is starting to get out of hand and you wish to utilize your best asset (your house) to do so.
- Maybe it’s about time to change from your original basic fixed rate home loan to a variable rate mortgage that will allow you to invest extra funds as well as redraw money as you would a line of credit.
How to Refinance Your Home
Whatever the reason, you have thought it through and weighed up both the benefits and disadvantages. You are now in the position to inquire about How to Refinance a House. Be clear on what you are doing:
- Make sure you do your sums properly before you start the process.
- Whenever you choose to refinance your mortgage there will be costs involved.
- Depending on the loan some of these costs can be quite prohibitive as you may find it would have been cheaper to leave things alone.
- It is often not wise to refinance simply to take advantage of a lower interest rate when rates are dropping.
- Extending the length of the original loan can give you lower repayments but as you will be paying over a longer term and taking into account the costs involved in closing a loan and taking out a new mortgage you may find you will be well out of pocket.
Steps to Refinance a House Successfully
There are advantages however and if you have thought it through and done your sums then move on to the next steps:
Research for a lender
The home loan industry is very competitive. Because of this you will be faced with a myriad of lenders offering various loans with varying rates. You will have been here before but as you are now interested in finding out How to Refinance a House there are a couple of subtle differences:
- A lot will depend on the amount of equity you have built up on the house you are buying and…
- Your track record as being a good client.
If you can tick both these boxes confidently you are in a good position to be successful in your bid to refinance.
Application time:
- You will need to get an appraisal done on your home. Some authorities require two.
- Make inquiries yourself as to what price other houses in your locality have been selling for over the last six months as this will help you get an idea of what value the appraisal company will finally award your home.
- Your lender may also help you out here as well in advising you of what appraisal company has the best credentials.
- You will also need all the other documents you had to produce when you made application for your initial loan.
- You are after all taking out a new loan as your existing loan will be paid out.
- Once your application is complete your lender may require a title search be undertaken to ensure no caveats are held against the title.
Good news – bad news time
Your application will be considered and your lender will ensure that all the paperwork has been collected and filed:
- Your loan application for refinance will then be either approved or disapproved.
- If approved a settlement date will be arranged.
- If disapproved the lender must provide you with the reason why.
Settlement
On the date specified for settlement you, the applicant, will meet with a representative of the lender and sign the mortgage documents in front of a qualified witness.
Disbursement
- After all the paperwork is satisfactorily signed your lender will then go about paying off the first mortgage.
- Any excess (if any) will be paid as previously arranged. Repayments will then start in the paying off of the new loan.
Contact us to find out more about How to Refinance a House because it can take just as much time, research and of course money to refinance a loan as it did to apply for the loan in the first place, but with the help of Home Loan Finder you can manage the process more affordably.
Related posts:
- House Mortgage Refinance
- How to Refinance an Existing Mortgage with HSBC
- Cash Out Mortgage Refinance
- Mortgage Refinance
- Refinance Fees
- Fox Symes Mortgage Refinance
- Refinance Real Estate Loan
- The Right Ways to Refinance
- Mortgage Refinance Costs
- How to Refinance a Second Mortgage
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
 
|
 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
 Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
 State Custodians Mortgage Company Standard Variable Offset Loan | Awarded Mortgage of the Year 2012 – this multi-award winner features 100% offset and a loyalty 0.25% rate drop after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
|
Ask A Question