Thinking about refinancing?
Refinancing doesn’t only apply to home and investment property, you also have the same scope to refinance commercial property and business lending.
People and businesses generally refinance for 1 of 4 reasons:
- Change in interest rates and fees,
- Debt consolidation
- To access equity in their property or to
- Improve service and lender satisfaction.
If any of these reasons relate to your current personal or commercial loans, perhaps it is time to look into your refinancing options, and there’s no better place to start than with a qualified professional. A mortgage broker can help you wade through the pros and cons of re-financing, but first let’s look at a few reasons to consider before making the move toward refinancing.
Interest rates & fees
There are some attractive interest rates on offer at the moment. When considering refinancing based on price it’s important to weigh up the terms and conditions of your loan, as well as financial benefit – how much money are you saving per annum? Take that figure and multiply by 5 – the average home loan is held for 5-6 years before it is varied, refinanced, the property is sold or reviewed again.
Securing a lower interest rate and reducing your monthly repayments is one reason to look into refinancing, but there are a few other things to consider such as; are you receiving the same benefits with a new lender? Is offset important? Do you need redraw? What ATM access is available in your area?
Hot tip: If you stand to lose existing features such as redraw, offset or access to the branch network it may not be worth refinancing, weigh up your options, write down the features you actually use regularly and make sure these are included on the new home loan.
Switch between variable/fixed rates
If you’d prefer the certainty that repayments will stay the same for a period of time, you may wish to switch to a fixed rate. Conversely, you may choose to take advantage of a lower variable rate, accepting the risk that rates may rise or fall in the future.
Hot tip: If you are an investor, fixed rates can be helpful to understand your investment costs each month and in most cases, interest-only repayments are still available.
Access equity in your home
Your home is likely to be one of your most valuable assets, and by harnessing home equity you have the opportunity to build additional wealth, purchase another property, invest in shares or simply achieve personal goals.
Consolidate debt
Refinancing your home loan can provide an opportunity to tie all of your debt into one loan, possibly your home loan, simplifying monthly repayments by having only one repayment. This may involve adding a car loan, credit card loan or personal loan into your mortgage to take advantage of the lower rate typical of a home loan.
Hot tip: Debt consolidation can come with some downsides. A short term debt – like a personal loan – can become a long term debt, resulting in paying interest on the balance for a much longer period, in turn costing you a lot more in the long term. For debt consolidation to be truly cost effective, you need to commit to making additional repayments to pay off the enlarged loan as quickly as possible.
Service and Lender Satisfaction
A change in your lender’s service, or satisfaction with an existing lender can trigger the need to refinance, particularly in the commercial and business space. A lender’s decision, bank conditions or fees and charges, annual reviews, interest rate changes and the need to revalue your properties are all good reasons to review your loan term and offering.
Hot tip: When banking staff change roles and move on, the knowledge of your file and the experience of dealing with someone familiar also moves on with them. If they are not replaced quickly with a person able to build rapport with you or show engagement to know and understand your business, your lender satisfaction reduces.
So, now that you’ve carefully considered all these reasons to refinance, where do you go from here?
What information do I need to refinance?
Once you can demonstrate that you have security and can repay the loan your new bank also wants to see your repayment history – this is important in securing the right new lender for you. In general information required Includes:
- Recent income tax returns (ATO Notice of Assessment)
- Business activity statement(BAS)
- Financial statements (profit & loss / balance sheet)
- Recent payroll receipts/pay slips
- Recent PAYG Summary
- 6 – 12 Months Bank statements to evidence your debt repayment history/current interest rate and repayments.
So, whether you are a business owner, investor or homeowner there are many reasons to review your existing lending facilities.
By engaging in TMFG when refinancing is on the table, you can ensure all of your options are carefully considered and you will be guided confidently through the process. Dealing with a mortgage broker is a chance to build a relationship with someone who knows you, your needs and your business – the first step towards prosperity. And if there is one thing we thrive on at TMFG, it is seeing our clients prosper.
Call us today to discuss your refinancing options and secure a more viable financial future for your current investments.