Refinancing In Australia: Weighing The Pros And Cons

Refinancing is switching your home loan to a different lender or product to access better features, lower interest rates, or consolidate your debts. Refinancing can be a smart way to save money, improve your cash flow, or achieve your financial goals. However, refinancing also comes with some costs and risks you must consider before deciding. In this article, we will introduce the importance of refinancing to borrowers, list the pros and cons of refinancing, and explain the steps borrowers need to take to get refinancing approved. We will also discuss how refinancing can benefit borrowers burdened with bad credit.

Why is refinancing important?

Refinancing can be necessary for borrowers who want to take advantage of the changing market conditions, improved financial situation, or increased home equity. Refinancing can help borrowers to:

• Reduce their interest rate and monthly repayments, which can save them thousands of dollars over the life of the loan.
• Access new features that suit their needs, such as an offset account, a redraw facility, a fixed rate option, or a flexible repayment schedule.
• Consolidate their debts into one loan, which can simplify their finances, lower their interest rate, and reduce their fees.
• Use their home equity to fund other purchases or goals, such as home renovations, investments, education, or travel.
• Refinancing can also be helpful for borrowers struggling to meet their current repayments, facing financial hardship, or dealing with bad credit. Refinancing can help them to:
• Negotiate a better deal with their current lender, such as a lower interest rate, a longer loan term, or a repayment holiday.
• Switch to a more affordable loan with another lender, such as a low-doc loan, a non-conforming loan, or a specialist lender.
• Improve their credit score by paying off their debts and maintaining a good repayment history.

What are the pros and cons of refinancing?

Refinancing can benefit borrowers, but it also has some drawbacks that must be weighed carefully. Here are some of the pros and cons of refinancing:

Pros

– You can save money by lowering your interest rate and monthly repayments.

– You can access new features that suit your needs and preferences.

– You can consolidate your debts into one loan and simplify your finances.

– You can use your home equity to fund other purchases or goals.

– You can improve your credit score by paying off your debts and maintaining a good repayment history.

Cons

– You may incur fees for exiting your current loan and applying for a new one, such as break fees, application fees, valuation fees, legal fees, stamp duty, and mortgage insurance.

– You may extend your loan term and pay more interest over time if you do not increase or make extra repayments.

– You may lose some features you value in your current loan, such as portability, loyalty discounts, or customer service.

– You may expose yourself to more risk if you borrow more than you can afford or if the interest rates rise in the future.

– You may damage your credit score if you apply for fewer loans or default on your new loan.

How do you get refinancing approved?

Refinancing is not a decision that should be made lightly. It requires careful planning, research, and comparison. Here are the steps that borrowers need to take to get refinancing approved:

1. Review your current loan and financial situation. Check your interest rate, fees, features, loan balance, repayment history, credit score, income, expenses, assets, and liabilities. Identify your reasons for refinancing and your goals for the new loan.
2. Compare different lenders and products. Use online tools such as calculators and comparison websites to compare interest rates, fees, features, eligibility criteria, customer reviews, and ratings of different lenders and products. Look for a loan that offers you a better deal than your current one and meets your needs and goals.
3. Prepare your documents and application. Gather all the documents you need to prove your identity, income, expenses, assets, liabilities, and credit history. Fill out the application form with accurate and complete information. Provide any supporting evidence or explanation that may help your case.
4. Submit your application and wait for approval. Send your application and documents to the lender of your choice. Wait for them to assess your application and conduct a credit check, a valuation of your property, and any other verification process. If approved, you will receive a loan offer with the terms and conditions of the new loan.
5. Accept the offer and settle the loan. Review the loan offer carefully and make sure you understand all the details. If you are happy with the offer, sign the contract and return it to the lender. The lender will then arrange the settlement of the loan, which involves paying out your current loan and transferring the property title to the new lender.

How can refinancing benefit borrowers with bad credit?

Borrowers with bad credit may need help getting approved for a new loan or a better deal from their current lender. However, refinancing can still be an option if they demonstrate their ability and willingness to repay the new loan. Refinancing can benefit borrowers with bad credit by:

– Allowing them to switch to a more affordable loan with a lower interest rate, a longer loan term, or a lower monthly repayment.

– Enabling them to consolidate their debts into one loan and pay off their high-interest debts, such as credit cards, personal loans, or car loans.

– Helping them improve their credit score by paying off their debts and maintaining a good repayment history on the new loan.

However, refinancing can also be more costly and risky for borrowers with bad credit. They may have to pay higher fees, such as application fees, valuation fees, legal fees, stamp duty, and mortgage insurance. They may also have to accept a higher interest rate, a shorter loan term, or fewer features on the new loan. They may also have to provide more security, such as a guarantor or a larger deposit. Moreover, they may expose themselves to more risk if they borrow more than they can afford or if the interest rates rise.

Therefore, borrowers with bad credit should seek professional advice before refinancing and compare different options carefully. They should also improve their credit score by paying their bills on time, reducing their debts, and avoiding unnecessary credit inquiries.

The Inevitable Conclusion

Refinancing is a process that can help borrowers save money, access new features, consolidate their debts, use their home equity, or improve their credit score. However, refinancing also involves costs and risks that must be considered carefully. Borrowers should review their current loan and financial situation, compare different lenders and products, prepare their documents and application, submit their application and wait for approval, accept the offer, and settle the loan. Borrowers with bad credit may face more challenges in refinancing, but they can

At Tiger Finance, we always guide you every step of the way with loan experts well-versed in the current situation in the world of financing. You can get a free consultation with our in-house financing expert without obligation to give you the most accurate picture of your loan situation today.

Contact Tiger Finance today so that we can help you begin your journey to secure the exact hassle-free loan product that you need. still benefit from it if they demonstrate their ability and willingness to repay the new loan.