Firstly, a quick primer for those new to the field: Refinancing (replacing your current mortgage rate with a new one) can be done with your current lender or by switching to a competitor. Savvy Australians refinance for many reasons, including wanting a lower or fixed interest rate, consolidating debts, to save money, or any combination of these. It’s not hard to do if you break it down into these simple steps, and could end up saving you money along the way.
Step 1: Know your current situation
Knowing when to refinance means knowing your current home loan rate – something 82% of Australian’s currently don’t*.
Here’s some things to consider:
- Your current interest rate and repayments
- If you’re paying any monthly fees
- If your loan type (fixed or variable) works for you
- If your repayment type (principal and interest or interest only) meets your requirements
- If there’s any other features that are important to you
- Whether your current lender will charge you for leaving them
- Other debts you wanted to consolidate** into your new debt consolidation loan.
Step 2: Choose your rate
Most banks offer a home loan calculator to compare your current rate against theirs. Give ours a go, and if the numbers look positive, you can also calculate your borrowing power, loan repayments and upfront costs. From here, you can choose your type of loan (Fixed or a combination of the two), which is where your research from step 1 will really come in handy.
Pro tip: If you’re consolidating your other debts (like a car loan or credit card) don’t forget to include these in your calculations.
Step 3: Let the bank take it from there
You’ve decided to take the leap and refinance, possibly to a better rate – well done! First, you’ll need to share some documents and have your property valued. Once the legal papers are signed, sealed and delivered, your bank will arrange a settlement with your current loan provider, acquire the loan from them, and kick off the repayment . Throughout all of this, your new lender will be able to guide you through the process and answer questions that may come up.
And that’s it! Like we said, people refinance for any number of reasons – they may have found a better rate, they might want to do that dream renovation, or they may just want to go on holiday. It’s a perfectly normal way to consolidate your debt into one easy payment, giving you the breathing space to get more out of every day, with the people that matter most.
Speaking of great rates, ours are super competitive, find out more here.
* UBank Know Your Numbers Index data conducted and compiled by Galaxy Research of 1,015 Australians in February 2018.
**Consolidating doesn’t ‘remove’ those debts from your life; they’re simply transferred from the original loan provider as an addition to your new home loan so you only pay one debt repayment each month. Of course, there is no one-size-fits-all solution here, but you could find it much easier to manage your finances with only one monthly repayment to concentrate on.