What You Need to Know About Refinancing
July 28, 2020 | Posted by: Keith Leighton
What You Need to Know About Refinancing
A home loan is generally a long-term proposition, but in some situations, it can make sense to refinance your mortgage. Your DLC Ideal Mortgage Broker will help you decide whether it’s right for you.
Refinancing involves taking out a new mortgage and using those funds to pay off your existing mortgage. Doing so can save money and result in significant financial gains over time.
Reasons you may want to refinance:
Lower Interest Rate - This is one of the most common reasons people choose to refinance their mortgage. This could help you to pay off your home loan sooner, potentially saving you thousands of dollars. Your broker can not only look for a better interest rate for you but also help find you the type of lending facility that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender. Either way your broker will help with the right advice. Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan. The interest rates, fees and the features need to be carefully considered and your broker can help you to navigate the options.
Change Your Loan Type - You may want to switch from a variable to a fixed rate with your existing lender, to lock in a low interest rate. Depending on the type of mortgage you have, this may require refinancing into a different product.
Renovate or Purchase An Investment Property - If you have equity in your home, you may be able to access some of the equity by refinancing your mortgage. (Note that you could also do this by redrawing or increasing the limit on your existing mortgage.) Your broker can help advise on the best option for you. Before going ahead with an increase or refinance, your home may need to be revalued and your broker will advise how much you can borrow.
Your Circumstances Have Changed - For example, a significant change in your income. By taking out a new mortgage (or increasing your limit on the existing mortgage) through your broker, you may be able to consolidate other debts, including personal loans and credit cards, into one facility, lowering your monthly payments and saving you interest. While refinancing can save money, it may not be right for everyone. Consider your financial situation and ask your broker whether refinancing is right for you.
The Refinancing Process
Getting the refinancing ball rolling is simple once you’ve determined your needs and done your research through your broker.
The Application - Your broker will evaluate your circumstances and assist you in submitting your application. You’ll be asked to provide identification documentation and proof of income such as pay slips, and to list your assets and liabilities. If you’re staying with your existing lender, you may not need to provide as much information.
Getting A Valuation - Lenders will often require a valuation on your existing home to determine how much you can borrow. This bank valuation happens during the loan approval process and generally requires an inspection of the property by a licensed appraiser.
Receiving Approval - Once the lender is completely satisfied, full loan approval is granted. You’ll receive an approval letter with a copy of the loan contract to review, sign and return to the lender.
Your funds will be cleared once all the signed documentation is reviewed. Your lender (or your new lender if you’re changing lenders) will arrange settlement of your existing loan and establishment of your new loan.
There are many reasons why you may want to refinance your mortgage. Before taking any action it’s important to talk with your DLC Ideal Mortgage Broker. They can help you to select the best loan product for your needs, based on your individual circumstances.
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