Why should you refinance?

Why should you refinance?

If you’ve been reading about how more Australians are refinancing their home loans this year, and how many mortgage lenders have been slashing their fixed and variable interest rates, you may be wondering if you should also think about refinancing your mortgage.

There are many different reasons why people choose to refinance their home loans, with each person’s decision being based on their own unique circumstances. Here are a few popular reasons why some people choose to refinance, to help you work out if one or more may apply to you at this time.

Your loan has changed

Were you on a home loan with a fixed interest rate? Did you get a discount on your variable rate as an introductory bonus offer? Once these offers come to an end and you switch to your loan’s revert rate, you may find that your repayments are nowhere near as affordable as they used to be.

Refinancing to a mortgage with a lower rate could help to keep your repayments more manageable, limiting the impact on your household budget.

You want to consolidate other debts

Do you have outstanding debts owing on credit cards or personal loans? Are the interest charges on these debts eating up a significant chunk of your budget each month?

Refinancing may let you borrow a bit more money in order to pay off these outstanding debts in one fell swoop, effectively consolidating your credit card or personal loan debts into your home loan. Because home loan interest rates are generally lower than those on credit cards and personal loans, you’ll likely pay less in interest each month, easing some pressure on your budget.

However, it’s important to remember that because home loans are paid off over much longer terms than most personal loans and credit cards (decades, compared to months), you’ll risk paying much more in total interest on your smaller debts by following this strategy. You may lower this risk by taking steps to make extra repayments and clear the extra money quickly.

You just want a better rate and/or to pay less

Even if you got the lowest home loan rate available when you first applied for your home loan, it’s unlikely that you’ll still have the lowest rate on the market after a few years have passed. If you still want to keep your home loan’s repayments competitive, every few years you may want to compare the home loan market and see if you can get a better rate.

You could try contacting your home loan provider and see if you can negotiate a discount. Depending on how you go, the next step could be to contact a competing mortgage provider and look at their refinancing options.

You want to be treated better

Unfortunately, not every customer receives the level of customer service they expect. If you’re not a fan of the time you spend on hold when you call your bank, or if their online banking systems are driving you up the wall, you may consider refinancing so you can switch to a lender that treats you better.

You want to use your equity

Once you’ve been paying your home loan for a few years, you’ll likely have built up some equity in your property. This can be especially true if property prices have risen in your area, and your home’s value has increased.

This equity can be used as security when you refinance, and may help you get a lower interest rate. Depending on your circumstances, you could also use your equity to secure a line of credit (basically similar to a credit card with a limit based on your equity), which you could use to pay for renovations, or buy a car at a lower rate than many car loans. It may also be possible to use your equity in one property to help you secure a loan on another investment property, though there are several risks involved with this sort of strategy.  

Your lifestyle has changed

Ever since you first got your home loan, more than a few things may have changed in your life. You may have started a family. You may have started or ended a relationship. You may have lost your job, or gotten a better-paying one.

If the home loan you originally applied for no longer suits your current needs, you may want to think about refinancing to a mortgage that more closely matches your finances and lifestyle.

You want to pay your loan off faster

The sooner you can get out of debt, the less money you’ll need to pay in interest charges. Refinancing to a home loan with a shorter loan term will mean more expensive monthly repayments, but you’ll pay less in total interest on your mortgage.

You could also refinance to a home loan that offers the option of making extra home loan repayments. These can help reduce the principal amount owing on your home loan, which can shrink your interest charges and bring you closer to exiting your loan early.

You want a home loan with more (or fewer) useful features and benefits

When you first applied for your home loan, you may have been limited in what mortgage features and benefits you could access. But by refinancing, you could benefit from:

  • Extra repayments
  • Redraw facility
  • Offset account
  • Loan portability
  • Repayment holidays

Refinancing to a home loan with features and benefits that match your personal financial situation could make a big difference to the level of value you enjoy.

On the other hand, the more features and benefits a home loan offers, the more it’s likely to cost in fees and interest charges. If your current home loan includes features and benefits that you aren’t really using, you may enjoy more value by switching to a more basic “no-frills” home loan.

You’re in financial stress

If you’re struggling to pay your home loan at present, switching to a cheaper loan could be one way to ease some of the pressure. However, because refinancing effectively means getting a whole new loan, this could make it more difficult to get a mortgage approved with a new lender, depending on your exact circumstances.

Consider contacting a mortgage broker or a financial counsellor before choosing to refinance your mortgage, to make sure the decision will be right for your needs. Also, remember that refinancing may involve paying a range of fees and charges – make sure the benefits will be worth the costs.

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Learn more about home loans

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

Is a home equity loan secured or unsecured?

Home equity is the difference between its current market price and the outstanding balance on the mortgage loan. The amount you can borrow against the equity in your property is known as a home equity loan.

A home equity loan is secured against your property. It means the lender can recoup your property if you default on the repayments. A secured home equity loan is available at a competitive rate of interest and may be repaid over the long-term. Although a home equity loan is secured, lenders will assess your income, expenses, and other liabilities before approving your application. You’ll also want  a good credit score to qualify for a home equity loan. 

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

Can I get a home renovation loan with bad credit?

If you're looking for funds to pay for repairs or renovations to your home, but you have a low credit score, you need to carefully consider your options. If you already have a mortgage, a good starting point is to check whether you can redraw money from that. You could also consider applying for a new home loan. 

Before taking out a new loan, it’s good to note that lenders are likely to charge higher interest rates on home repair loans for bad credit customers. Alternatively, they may be willing to lend you a smaller amount than a standard loan. You may also face some challenges with getting your home renovation loan application approved. If you do run into trouble, you can speak to your lender and ask whether they would be willing to approve your application if you have a guarantor or co-signer. You should also explain the reasons behind your bad credit rating and the steps that you’re taking to improve it. 

Consulting a financial advisor or mortgage broker can help you understand your options and make the right choice.

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

How do you qualify for a CBA home loan with casual employment?

Qualifying for a home loan without a full-time job may be challenging, but it can be done. The first step is to understand how a CBA home loan is assessed when you have casual employment.

Most lenders will assess your expenses and savings while checking your loan eligibility, checking on factors crucial to home loan approval, such as if your bills are paid on time and what your credit score presently looks like. 

Your income can be one of the most critical factors to determine your final approved home loan amount. As such, you’ll need to provide payslip copies to lenders to assist them in assessing your income during the loan tenure, regardless of your employment status, full-time, part-time, or otherwise.

Casual employees will want to be casually employed for at least 12 months to be eligible for a home loan. Alternatively, you want to have worked as a permanent casual worker (working for a fixed number of hours per week) for at least one month, or you should have been in your current job for a minimum of three months (if the hours are irregular) to be eligible for the loan.

What is the Home Loan Rate Promise?

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*

How to apply for a home loan pre-approval from St. George?

By applying for a home loan pre-approval, you can establish how much you can afford to borrow and look for houses within that pre-approved budget. Getting home loan pre-approval from St. George is a fairly simple process that can be completed within 15 minutes. 

The first step in this process is completing a home loan application. Once that application is submitted, a home loan expert from St. George will contact you to understand your requirements and your current financial position. You could also directly contact a home loan expert at the bank by calling 13 33 30 or by visiting your nearest branch. 

Once the application has been processed, the home loan expert will ask for some basic documentation to confirm your borrowing capacity. After this, you should be issued a home loan pre-approval, subject to certain conditions. 

Based on your home loan pre-approval from St. George, you can then find a property and make an offer. Your home loan expert will arrange to have the property valued and may request for more documentation, taking your home loan application to the next step. 

 

 

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for.