The refinance checklist every borrower should consider
If you’ve had your home loan for several years already, it’s likely that your needs have changed and you need to conduct a financial health check.
You may have a different financial or personal situation, and your current mortgage may not offer a range of valuable features that suit your needs.
Whether you want to scout for a more competitive interest rate or opt for a loan with fewer fees, many borrowers refinance their mortgage to reduce their periodic repayments or to find a loan with more suitable features.
When making the decision to refinance, you should consider your total refinancing costs including the fees associated with exiting your current loan and taking out a new loan.
It is also important to evaluate the features of the new loan to make sure that the refinance will cater to your individual needs, and that it will benefit you financially.
Read on to discover which money-saving features you should look out for when refinancing.
1. Low Interest Rate
The primary reason to refinance is to find a better interest rate to reduce your interest liability and to lower your mortgage repayments. As the home loan market is competitive, many lenders offer discounted rates which could lead to significant cost savings for the lifetime of your loan.
For example, if you took out an average mortgage of $471,000 at an average standard variable rate of 5.35%, and found a loan with a lower rate of 4.85%, you could save approximately $144 each month or $1,700 each year.
This would amount to a staggering saving of $52,000 over the life of your loan.
When refinancing, check out the comparison rate to understand the true cost of the new loan. You can do so in the table below by clicking on the 'Comparison rate' heading and sorting by home loans without a fee.
2. Offset Account
An offset account acts as a transaction account which can reduce the interest payable on your mortgage by the amount maintained in the account. Every dollar that sits within the account effectively ‘offsets’ the amount of interest your bank can charge on your loan.
When you have your salary or any other income deposited into the offset account, this will contribute to the reduction of the interest payable on your loan. When you need these funds, you can access them the same way you would with a normal savings account.
3. No Ongoing Fees
The offer of no ongoing fees, or low monthly account charges is a common feature of many home loans. A mortgage that waives ongoing fees reduces the overall cost and process of refinancing as you won’t have to incur additional expenses throughout the life of your loan.
You can sort through home loans with no ongoing fees in the table below by clicking on the 'Ongoing fees' column header.
4. Application Fees
While not strictly a feature, your new loan will charge application fees and mortgage registration fees which you need to consider before making the switch between providers. Depending on the lender, application fees can range from $400 to $750 and mortgage registration fees start at approximately $100-$150.
You need to evaluate the cost that these fees will contribute to your entire mortgage and consider whether this is a realistic cost for your situation.
Finding a home loan with no application fees could help save you hundreds of dollars in upfront fees than you would otherwise have to pay on an alternative loan.
Keep in mind that although some lenders may charge no application fees, they may compensate for this by charging expensive fees for valuations or legal costs.
Loan portability means that you can transfer your existing loan to another property, given that your new property fulfills the criteria outlined by your lender. The portability feature can save you the fees associated with closing one mortgage and applying for a new one.
You may wish to sell your home and purchase another simultaneously, especially if you see a good deal, or if your family needs more living space. Exercising the portability option provides you with increased flexibility in the event that you decide to relocate. This allows you to avoid a range of fees such as discharge fees and application fees.
To secure loan portability, the settlement date of your new property must coincide with the settlement date of the sale for your old home. It is also essential that the new loan amount is similar, or lower, than your existing loan.
Top Home Loans for Refinancing
Refinancing your mortgage is an important decision so it is vital that you understand the features that can help you select a new loan that suits your individual circumstances. While the above features are useful to consider when comparing refinance home loans, other features such as the ability to make
While the above features are useful to consider when comparing refinance home loans, other features such as the ability to make unlimited additional repayments and a free redraw facility are also worth considering.Back to top