Refinancing a home is a practical financial decision for any homeowner, but it could initially be an overwhelming task. However, it’s not as overwhelming as people make it appear. There are ways you can make the process easy, well away from red tape, confusing technicalities and a whole lot of mess.
There’s also an extra challenge from the fact that the lenders across the home loan industry are in stiff competition to close a deal with you. It may be a consolation that refinancing is historically a low-risk and low-interest rate investment, but even then, if you’re not careful, you may be risking your refinanced home to ruin. Here’s an article, then, on the essentials that people need to know about refinancing at the most cost-effective strategy.
1. Know What It Is First
It’s hard to start engaging in something that you don’t understand. And that’s why you first should understand that refinancing is basically the process of moving from one existing home loan to another home loan, with different tax obligations and benefits.
You may also want to know that getting a different home loan is usually different to investors of different profile, depending on their unique taste of risk.
Refinancing is also ideal for those people who want to get better interest rates and gain access to better loan features or at least consolidate different several debts into one mortgage package.
When they do this, they can either stay with their current lender and reduce the hassle of talking to different banks – doing the paperwork and all that mess – because there’s only one mortgage to deal with. Or they can also switch to a new one and most likely get a better set of loan benefits.
2. Finding The Right Mortgage Broker
To maximize the possible returns and improve the interest rates of the loan, it is important for a refinancing strategy to accommodate the perfect mortgage broker. Interest rates can be fluctuating, can be ultra low or ultra high, depending on the market, and so getting a mortgage broker with high credibility could help anyone meet the new financial obligations with ease.
This means you need a good broker to make your refinancing strategy work for you, and not let it dictate your life. The right mortgage broker you trust could also save you money and time.
3. Reviewing Available Options
In the world of loans, a slight change in the market could put investors at default, harming the homeowners’ capacity to deal with financial obligations and decreasing the value of their collateral. This is why it’s important to have all the available options for any refinancing plan, and to always find an exit in case things go south in one investment nest.
The first thing to do in reviewing available options would be to do the basic homework. Don’t get distracted by the unceasing flow of information you get to read from investment blogs. Yes, you should learn how not to fret during a slight change in the attitude of troubled borrowers in the home loan industry. What you should learn first is simple: find the best rate whether it’s from a small or big bank.
You may be surprised: the smaller banks or non-bank leaders may be giving you what’s better for your unique investment capacity, depending on your status with your current lender. The best, easy and less time-consuming way to do this would have to get a broker you trust, have them identify the best loans that suit you and let them negotiate with the lenders on your behalf.
Just don’t forget to remind the broker of the unique circumstances that affect you, so they know what packages don’t apply to your status.
4. Maximum Flexibility
It is also important to avail of the flexibility options in any refinancing plan. One good way to be more flexible in your refinancing strategy is to switch to a mortgage plan with unlimited additional repayment options.
A redraw facility and/or an offset account could also help a homeowner get a better leeway when the real estate market faces turbulence. If you intend to stick with your current loan, then you may want to just gain access to an investment property that has better equity.
When you by then have made your decision and see which loan package suits your taste of risk, have your broker review your financial situation and see how much you can officially borrow from the new loan package.
5. Submitting the Application
So you got a broker you trust, a broker that won’t rip you off, and that won’t flip you over to a ruinous path. The broker handles all the paper, handles lodgement and engage with the lenders, but that doesn’t mean you do nothing. And your duty as the home loan owner is to ask the right questions.
These questions would need to have to do with how long will you be under the new loan, the features of the new loan, how the redraw facility would work and even how the offset account would legally affect your current credit status.
It’s also important to ask your broker of the interest of the new loan and get the details that are as specific as you can get. You should also clarify with the broker the repayments you will be making on the new loan. The fees and charges that come with the refinancing, which include the start-up, settlements and the establishment fees that need to be met. You should also meet the applicable government charges that apply to your new contract.
6. Waiting for Approval
After your broker has finalized everything you need to process, you will receive a letter of offer and contract from the new lender once your application is approved. A settlement will be reached once the terms are in agreement with your current loan status or credit standing. And only then can you congratulate yourself for your new home loan!
Your current home loan will then be automatically drawn down and be replaced with the current loan package whose funds will be used to pay off the current home loan you just replaced.
You will, however, need to have the Discharge of Mortgage document registered first with the Land Titles Office. Your broker will then lodge the aforementioned document with the Land Titles Office. You can then start making repayments directed to your new loan, making all those hard homework you did finally pay off.
But all this could be daunting if you’re overthinking it. You don’t have to waste your time on all these details. The approval concerns can easily be delegated to a trustworthy broker that works for you in the background.
7. Extra Tips
We should also add here the importance of updating, reviewing and reevaluating the mortgage market at least once every full year just to see if the home loan you have is the best there is. Just don’t forget to contact the broker you trust to make the most informed decision you could make with your home loan assets.