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FAQs

What does refinancing a home loan mean?

Refinancing is when you take out a new mortgage in order to pay off an existing loan. This often occurs due to a change in financial situation, or because you want to secure a better deal on your mortgage. This can be facilitated with the same lender, or involve switching to a new mortgage provider.

What is the benefit of refinancing a home loan?

There is a range of benefits to refinancing your home loan. It can allow you to take advantage of a better home loan deal, unlock equity in your home, reduce the fees you pay, simplify your repayments (especially if you’re consolidating multiple debts) and even shorten the term of your mortgage therefore reducing your interest payments.

How soon can you refinance after refinancing?

How long you need to wait before refinancing depends on your mortgage provider. Some allow you to do so immediately after closing, while others have a waiting period of six months or longer. It’s best to check with your lender to determine their specific requirements.

What fees are involved in refinancing a mortgage?

Some common costs of refinancing include application fees, valuation fees, registration fees and discharge of mortgage fees.

What is the process of refinancing a home?

The first place to start with refinancing is to assess your current financial situation to ensure it’s the right choice for you. Then, you generally start by contacting your existing lender to see whether they can improve your current home loan deal. If they are unable to provide an alternative, you would then work with a broker to compare other home loans on the market. If you find a better option, you would apply for your new mortgage and exit your old one.

What is the risk of refinancing?

There are a few risks involved in refinancing your home. One of these is that if you apply for a fixed rate loan, sometimes this rate can actually fluctuate in the period between approval and settlement. This would mean you may not have actually locked in a better rate which is why it’s important to check you’re getting a home loan with a rate lock feature. Other risks involve getting locked into a longer mortgage term (therefore increasing your interest repayments) and being tricked by tempting introductory variable or honeymoon’ rates.

How much could refinancing save you?

There’s no hard and fast rule as to how much refinancing can save you: this depends on your unique financial situation, as well as the difference between your old and new interest rate. However, data shows that when your interest rate drops by 2% or more, this could save you up to $20,000 over the course of your mortgage.