Refinancing Your Loan

In today’s lending market, competition has made refinancing much easier than it was decades ago.  There are many benefits to consider refinancing.  When financial circumstances have changed, you’ve started a new job or have had a job promotion, you are dissatisfied with your existing lender, or maybe your current home loan no longer suits your needs.

When Should You Switch?

Refinancing might have many advantages but it has its risks too.  Consider the pros and cons and assess if you are likely to benefit from refinancing.

Review factors such as the level of service provided by your current lender, reduced or added features compared to your mortgage, interest rate and bank fees, changed current and future financial circumstances.

Refinancing involves certain costs and takes time.  Be clear about why you want to refinance.  Decide the type of loan you want, list the required features and do your sums to make sure you will be better off in the long run.

Which Loan Should You Switch To?

Before you decide on which loan you should switch to, speak to an Absolute Finance Solutions mortgage broker who will be able to assist you in analyzing your needs and offer you with a suitable loan solution. Consider your different options and choose the best loan that suits your needs.

If you are looking at a variable rate loan, you might be able to enjoy the flexibility and features that it provides. However, interest rates will vary according to the Reserve Bank of Australia and repayments might increase or decrease in the future. An increase in interest rates might affect family budgets and lead to changes in your overall financial circumstances.

Alternatively, refinancing to a fixed loan can offer protection against rising interest rates. This might be beneficial to borrowers who don’t have the cash flow to cover unexpected increase in loan repayments. A Fix interest rate will also provide borrowers the ability to budget their finances over the long-term.

Another option available to you is to refinance to a split loan. By splitting your loans, you can fix part of your loan and leave the rest on a variable rate. In general, split loans offer the flexibility and features of variable rate loans whilst offering the certainty of a fixed loan.

Divorce

A divorce is not only emotionally draining, you have to deal with the disintegration of your family and think about money at the same time when your stress levels are going through the stratosphere. If you borrow jointly with a spouse, the credit contracts are created jointly and severally; that is to say that the lender can hold you 100 per cent responsible for the entire debt.

Things to consider if you are refinancing as part of a divorce:

  1. Will you be able to service the debt on one income?
  2. Can you refinance the loan to a 30 year loan to reduce the repayments?
  3. Will there be any fees for discharging your existing loan?
  4. Are you better off selling the property and splitting the proceeds?
  5. Is there a time frame you need to meet with regard to splitting up your assets?
  6. Who will be responsible for ensuring the repayment requirements continue to be met while the divorce is being finalised?