Refinancing can be a great way to get a lower interest rate on your existing mortgage, reduce your monthly payments, or even shorten the length of your mortgage. In this blog post, we will discuss the basics of refinancing and also provide some tips to help you get started!
Refinancing is when you move from one lender to another. The major reason people do refinancing is to save money on interest rates, which means that your interest rate is high and you need a lender who can provide you with something lower.
But there are other reasons as well, for example,
- There’s equity in your house and you want to take it out
- You want to do some renovations
- You want to buy a car by taking equity, or
- You want to take some money out because you have got equity in the house and want to go on holidays/ wedding, etc.
There are various reasons. But effectively, the most important reason is that some bank is offering me a cheaper rate than my existing lender.
On average the whole process will cost you around $600-$800. Also, there are many banks offering cash back at the moment ranging from $2000-$6000. So, the costs are well covered. In fact, you’ll make a small profit, and save on interest as well.
Mortgage brokers, on the other hand, do not charge an upfront fee for their services. As a result, it’s better to work with one to acquire lower interest rates.
The first stage in refinancing with a mortgage broker is for them to present you with a variety of lender options. Based on your needs, such as whether you want a large bank or a small lender, or you simply want to save money on interest and fees, 2-3 lenders are shortlisted if necessary. Then, based on the bank you selected, the mortgage broker will request all relevant papers such as IDs, income documents, bank statements, etc. They’ll create an application, send it to the bank, and obtain approval followed by settlement with the new lender, which will take between five and six weeks from start to finish.
A discharge form is to be submitted to your present lender. If you’re working with a mortgage broker, they will assist you in completing those forms and will manage the process from beginning to end. It can take the lender up to two weeks to complete the paperwork to transfer to the new lender.
It’s not simply dependent on your age. You refinance because your existing bank is charging you a greater interest or fee. There are alternative banks that can save you thousands of dollars each year. And this is why it isn’t based on your age or any other factor beyond cost savings
The most important thing is that you must be careful not to make too many inquiries since this will harm your Equifax credit score. There’s nothing wrong with asking about a credit card, personal loan, house loan, or other financial transaction. However, making frequent inquiries in a short space of time will lower your credit score.
In Australia, every resident has their own credit file with their name on it. It’s known as the Equifax credit file. It has a score of 1200. Every time you make a credit enquiry, the lender will go into your credit file and check your repayment history and conduct with other lenders. It is important to pay every liability on time as every lender has to go and update the repayment history every month on your file.
A credit score of 700+ score is considered decent.
If you Google search “Equifax credit score” you’ll find numerous websites, some of which charge $29 or $19.95, or something similar. There are also a few free sites available.