Understanding The Refinancing Process: How to Save Money and Achieve Your Goals

Refinancing is switching your existing home loan to a new one, either with your current lender or a different one. Refinancing can help you save money on interest, lower your monthly repayments, access better features and services, or use your home equity for other purposes.

Why Refinance Your Home Loan

You should refinance your home loan for many reasons, depending on your personal and financial situation. Some of the most common benefits of refinancing are:

Saving money on interest: If you can find a lower interest rate than what you are currently paying, you can reduce the interest you pay over the life of your loan. Even a tiny difference in the interest rate can make a big difference in the long term. For example, if you have a $500,000 loan with a 25-year term and an interest rate of 6%, you will pay $579,767 in interest over the life of the loan. But if you refinance to a 5% interest rate, you will pay $466,279 in interest, saving $113,488.

Lowering your monthly repayments: Refinancing to a lower interest rate or extending your loan term can reduce your monthly repayments and free up some cash flow for other expenses or savings. For example, using the same scenario above, if you refinance to a 5% interest rate, your monthly repayment will drop from $3,216 to $2,923, saving $293 or $3,516 per year.

Accessing better features and services: Different lenders offer different features and services for their home loans, such as offset accounts, redraw facilities, split loans, fixed-rate options, loyalty discounts, online banking and customer support. By refinancing, you can find a home loan that suits your needs and preferences better than your current one.

Using your home equity for other purposes: Your home equity is the difference between the value of your property and the amount you owe on your loan. Your equity grows as you repay your loan, and your property value increases over time. You can refinance your home loan, expand it to withdraw some of your equity, and use it for other purposes, such as home improvements, car loans, holidays, or investments.

How to Refinance Your Home Loan

Refinancing your home loan is easier than it may seem. Here are the steps you need to follow:

Step #1 – Compare your options: The first step is to compare different lenders and home loans to find the best deal for you. You can use online tools such as comparison websites, calculators and guides to help you with this process. It would be best to look at the interest rate and the comparison rate, which includes any fees and charges associated with the loan. You should also consider each lender’s features and services and how they match your needs.

Step #2 – Apply for pre-approval: Once you have found a suitable lender and home loan, you can apply online or over the phone. Pre-approval is a conditional approval that indicates how much you can borrow from the lender based on your income, expenses, credit history and property value. Pre-approval does not guarantee that you will get the final approval, but it gives you an idea of how much you can refinance and helps you prepare for the next steps.

Step # 3 – Gather your documents: To get final approval for your new home loan, you must provide some documents to verify your identity, income, expenses, assets and liabilities. These may include:

• Proof of identity: such as driver’s licence, passport or birth certificate
• Proof of income: such as payslips, tax returns or bank statements
• Proof of expenses, such as utility bills, credit card statements or loan statements
• Proof of assets, such as property titles, car registration or investment statements
• Proof of liabilities, such as mortgage statements, personal loan statements or credit card statements

Step #4 – Arrange valuation and settlement: The lender will arrange a valuation of your property to confirm its market value and how much equity you have. The valuation may be done by an independent valuer or by using an automated valuation model (AVM). The lender will review your application and documents and decide whether to approve or decline your new home loan. If approved, you will receive a loan contract that outlines the terms and conditions of your new home loan. You should read this carefully and sign it if you agree with it. The lender will then arrange the settlement of your new home loan, which involves paying out your old loan and transferring the balance to your new loan. You may need to pay some fees for this process, such as discharge, application, valuation, and stamp duty. The lender will inform you of these costs before the settlement.

Step #5 – Enjoy your new home loan: After the settlement, you can start enjoying the benefits of your new home loan. Keep track of your repayments and interest rate changes, and review your home loan regularly to ensure it still suits your needs and goals.

How Refinancing Can Help You

Refinancing your home loan can help you save money, improve your cash flow, access better features and services, or use your home equity for other purposes. However, refinancing is only for some, and it may only sometimes be the best option for you. You should consider the costs and benefits of refinancing carefully and seek professional advice if you are still deciding. Refinancing can help you if:

– You can find a lower interest rate than what you are currently paying

– You want to lower your monthly repayments or change your loan term

– You want to access better features and services from your lender

– You want to use your home equity for other purposes

– You are not happy with your current lender or home loan

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.