Refinancing your home loan is something most homeowners have considered. Like many though, you might have been put off by some of the misconceptions and confusing remarks made by other brokers, advisors, and friends. At Melbourne Finance, we want our clients to understand the outcomes and feel comfortable with refinancing their home, after all, transparency is key when it comes to finding a great broker. Here is a quick breakdown of some common misconceptions.
What is refinancing?
Refinancing, put simply, is the process of taking out a new mortgage to repay an existing loan. Generally, people decide to refinance their home when living conditions have changed, their credit score has improved, want to restructure their loan or simply they want a better interest rate. Refinancing is a lot less stressful than acquiring your first mortgage because it is exclusively handled by the lenders, making it a more straightforward process than your first home loan. The best part is that your new home loan has more favourable terms, like no mortgage insurance and a shorter loan lifespan.
5 Common Misconceptions about Refinancing
1. You can only refinance once
You can refinance your home as many times as you want but there is a seasoning period. A seasoning period is the amount of time a property has had an active mortgage and ensures that people do not continue to take out equity on their home every six months or jump around between lenders frequently. If you have a history of refinancing continuously every 6 – 12 months, you will eventually find that many lenders will not want to offer you a loan.
2. It is too much hassle to refinance.
Refinancing is all about you, so if it is becoming a hassle this is a key indicator you are not with the right broker. In our opinion, it is all about customer service. If you choose Melbourne Finance to refinance your home, we will do everything we can to make the changeover a swift, hassle-free process. We want to ensure you have the best home loan that meets your needs.
3. Refinancing to a slightly lower interest rate is not worth it.
This is an old folk tale, as any discount has significant impacts on your home loan. For example, if you have an $800,000 loan and you reduced your interest rate by just by 0.2% you could save around $75,000 on a 25-year loan. However, it is not all about the interest rate, there are other reasons you should consider refinancing such as removing unnecessary fees or being able to pay your mortgage off faster.
4. The interest rate is the only important thing.
Not true, as there are many other reasons you refinance your home. These days refinancing is all about making sure you have the right mortgage to suit your needs. One of the more common reasons homeowners refinance is because they can negotiate loan terms and the clock restarts on their new home loan, so instead of having 25 years to pay off a mortgage, they might choose to refinance and reduce it to 20 years.
5. It is free to refinance.
Refinancing your home does come at a cost as there are still many processes involved that have costs associated with them including discharge, origination, and title registration. Advertisements from other providers say cost-free will probably have higher comparison rates or a fee that you will have to pay upfront. At Melbourne Finance we want to be as transparent as possible with you and can explain to you how we earn money. In fact, we have even written an article about it.
Choose to refinance with Melbourne Finance!
2021 is a great time to consider refinancing as many people’s circumstances have changed and interest rates are at a record low. If you are looking into refinancing, our team wants to make sure you find the right home loan. Refinancing does not have to be stressful, so take the hassle out of your home loan and give us a call on 03 8568 3644 or shoot an email to hello@melbourne.finance.