Refinancing means replacing your existing home loan with a new loan, either by negotiating with your current lender or switching to a different loan provider.
If you’re thinking about refinancing, it’s important to assess your total expenses, including application fees, legal charges and possible penalties for early repayment.
Seeking advice from a mortgage broker in Sydney, like Loan Station, could be beneficial to determine the potential advantages and disadvantages and confirm the loan’s compatibility with your refinancing goals and financial needs
How to compare home loans
A low interest rate is the most common feature borrowers look for when comparing home loans. However, there are other features that also affect how much you pay for your home loan.
To know if you’re getting a good home loan product, it’s important to understand what you’re looking for so it’s easier to compare home loans in Sydney. Here’s a quick guide on comparing loans:
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1. Comparison rate
Looking at the comparison rate of your home loan can be extremely helpful. The comparison rate includes the interest rate and ongoing or upfront fees over the life of the mortgage combined into one percentage figure.
This can help borrowers see a more accurate representation of the loan.
However, the advertised interest rate is not necessarily the rate your mortgage lender will give you. Lenders offer different rates to different borrowers depending on factors like the size of their deposit, whether they want an interest-only loan or whether it is for an investment or owner-occupied property.
2. Key fact sheets
A key fact sheet is a document that summarises the loan you’re considering, including a personalised comparison rate. It includes an estimated lifetime cost for your home loan, includes the size of monthly and annual repayments and explains how monthly mortgage repayments will be affected if interest rates increase.
Key fact sheets can be obtained from your lender who are required by law to provide one to a client when requested.
3. Loan refinance calculator
Use Loan Station’s refinance calculator to find a loan that fits your financial needs. The in-depth questionnaire covers nine categories, helping you assess your options based on your circumstances.
The nine categories are:
- Tell us more about your current loan
- Choose your loan features
- Reasons for refinancing
- Your finances
- Your details
- Borrowing capacity
- Your product options
- Indicative proposal
- How much you can save
Within each category are detailed questions, which would require your personal and home loan information.
A few examples of the information you’re required to enter / select are:
- Current loan amount, current lender, interest rate and current monthly repayment
- Show all available lenders, major lenders, non-major lenders, exclude some lenders
- Type of loan you prefer: fixed, variable, unsure
- Income details, total monthly repayments, total current loan limits, total credit card limits
- Number of applicants for this loan
- Consent to privacy disclosure
After following each of the steps, you would have a good idea of the loan options based on your financial circumstances and needs.
The refinance calculator is a tool to help you calculate how much you may save in time and repayments when switching your home loan, as well as how much you seek to gain through new loan features.
Keep in mind that a refinance home loan calculator does not take every aspect of your personal situation into account, such as your credit score or employment status, and is not a substitute for professional advice. Consider contacting Sydney-based mortgage broker Loan Station for advice specific to your personal circumstances.
4. Interest rates
Look at how interest rates differ between various lenders. Compare and contrast them against each other and see which lender offers the most competitive rate.
You should check how their fixed and variable rates differ from their competitors.
5. Associated fees
Lenders will charge various fees, so check what associated fees and charges are levied. Valuation fees, legal fees, application fees, monthly or annual fees, late repayments and discharge fees are some of the fees you need to compare.
While exit fees are now abolished, most lenders will still charge a discharge fee when you close your mortgage, due to the work required to complete the discharge.
6. Offset accounts
Linked to your home loan, an offset account can save you interest payments over the life of your loan.
The money in the account is offset against your mortgage, reducing the amount of interest you need to pay.
So, if your offset account has $20,000 in it and your home loan is $400,000, this means you’ll only pay interest on $380,000.
7. Extra repayments
Check if the loan allows extra repayments without charges. Making additional payments can significantly accelerate your home loan payoff
Final thoughts
Choosing a home loan through refinancing is an important decision. By considering factors such as comparison rates, associated fees and unique features like offset accounts, you can make an informed choice that aligns with your goals. A well-researched decision can lead to significant savings in the long run.
Ready to explore your refinancing options? Use Loan Station’s refinance calculator, guiding you through the process based on your unique financial situation. Contact us on 1300 46 46 11 or email us at info@loanstation.com.au for professional advice and assistance tailored to your needs.
