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How to save money on your mortgage and pay it off sooner?

As a result of the ever-changing nature of the mortgage industry and the increased availability of loan options from a variety of lenders, borrowers may now pick from among hundreds of different loan options.
As your life and financial situation changes, you don’t have to feel “locked in” to a particular loan type; you may move to a different loan product with the same or a different lender.
Refinancing refers to the process of switching to a new lender for a loan, which is very prevalent nowadays. This guide will provide you an overview of the reasons individuals refinance and the factors you may want to think about when deciding if a loan switch is good for you.

Why Refinance?

There are many factors to consider when deciding to refinance, but ultimately, you want to find a loan that works best for your situation.
Reasons to consider refinancing include:

  • Obtain a reduced interest rate.

  • Competition among lenders means you should shop around for the best offer and that can mean a reduced interest rate for you.

  • If interest rates have reduced since you took out your loan, you may be able to pay less each month or keep making the same payments but pay off your mortgage faster.

Having this option gives you more freedom to choose the loan that works best for you. Keep in mind that if you decide to move to a loan with a variable rate, interest rates might rise at some point in the future.

Fix in interest rates

The best way to ensure that your monthly payments won’t change unexpectedly is to select a loan with a low interest rate that you can lock in for a certain amount of time. The interest rate you pay depends on how long you want to lock in the loan, so it’s smart to do the math to see how much you can save.

Changing lenders

It’s possible that your current loan or lender may no work with your present situation, forcing you to seek other options.
If working with your current lender makes it difficult to access the equity in your home, you may want to look into other options. You might also prefer a lender with convenient contact options like a nearby branch or phone/web support.
We’ve seen that some customers seek out lenders that share their personal beliefs in addition to meeting their financial needs and goals.You should consider these and other factors while deciding whether or not to switch lenders.

Reviewing loan features

Though at first glance it may appear that all loans are the same, there are really a number of factors that affect price and ‘user friendliness.’
Features of some loans allow for adjustable monthly payments, simplified access to equity for asset creation, and so forth. Let’s have a look at some of the potential features that may be included in a home loan so that you can choose the one that best suits your needs:

Flexible repayments

If you are able to make additional payments at no additional expense, you can lower the principle of your loan more quickly and save considerably over the life of the loan.

Redraw

Redraws provide borrowers the option to contribute more money directly to their mortgage, which can lower the amount of interest that must be paid. And if necessary, those funds may then be used at a later time. Redraws typically take a bit longer and may be subject to redraw fees, whereas offset accounts typically let you access any needed cash the same day.

Offset account

You may deposit your pay check into a mortgage offset account, transfer funds from other accounts, and utilise the money there for regular expenses like groceries and bills. This account is tied to your mortgage. As long as you make sure to take out less than you put in, it might also lower the interest that is due on the remaining balance of your loan. As an example, if you have a $440,000 loan and $22,000 in your offset account, your interest payment will only be based on $418,000 ($440,000 - $22,000).

Loan portability

Loan portability is a helpful feature that allows you to maintain your loan when you move to a new house, given that Australians are shifting homes increasingly frequently. If you anticipate moving within a few years, the benefit for you is that you may maintain the same loan rather than having to terminate it and establish a new one. This saves you time and can also help you avoid any lender fees and penalties that would otherwise be incurred.

Debt consolidation

Debt consolidation is one of the most effective debt-relief strategies. Refinancing your mortgage allows you to consolidate and combine your debt payments into one account. This allows you to focus on one monthly payment amount, one payment due date, and most crucially, one monthly interest rate.

Accessing equity

Having a financial cushion may be quite helpful when facing unexpected situations or difficulties in life. The equity in your property might be tapped through a refinancing. Get the money you need whenever you need it by taking a loan against your home's equity. Whether it's for a down payment on a rental property, your child’s wedding, or a much-needed roof replacement- when times are tough financially, it can be a huge relief to be able to borrow against your equity.

How to refinance?

Because you already have a loan, switching to a different loan or lender is typically a simple procedure. You’ll also get an understanding of how, despite seemingly similar interest rates, there may be minor variances between loans that make one more suited to your requirements. Therefore, it is beneficial to get professional guidance from someone who can analyse your unique financial position objectively and provide you with appropriate lending possibilities.

Get professional help

Receiving professional assistance is essential during the refinancing process. When clients choose us to help them refinance, we consider a wide range of factors, such as:

  • The interest rate

  • Structure of a loan

  • Rate of comparison

  • Your current and future objectives

  • Loan features that are important to you

  • The lender, and whether they meet your needs

  • Estimates of how much you could save

As someone who has worked with clients who have had a wide variety of refinancing needs, we can tell you that there is no “one size fits all” loan or lender. When we assist you in refinancing, your financial solution must be tailored to your specific needs, whether it be to consolidate debts, lower interest payments, get access to equity, or develop future wealth.

The cost of refinancing

Some refinancing fees and costs may be waived or reduced by a lender that is competing for your business.
We can help you clearly decide if there is sufficient advantage to refinancing, and how much more you may be qualified to save, based on your personal goals, existing lender, loan size, interest rate, and any cash incentives on offer.

Lender’s Mortgage Insurance (LMI)

The bank charges this fee to insure them in the event that the applicant fails to fulfil their repayments and defaults on their loan. LMI is often paid if you borrow more than 80% of the home's value and is not transferrable.

This implies that even though you paid LMI with your initial lender, if you borrow more than 80%, you may be requested to pay it again. As a result, it is critical to carefully consider if refinancing is in your best interests and how much better off you may be if you pay fees such as LMI.

Borrowing costs

Although many new lenders will charge you an initial fee, keep in mind that not all of them will, and that some of these costs may even be negotiable.

  • Loan application fee - A basic fee charged by a new lender

  • Settlement fee - A fee may be incurred when your new lender pays off your existing mortgage

  • Valuation fee - Lenders may impose this charge if they hire an appraiser to determine the market worth of your home.

Exit Fees

Some lenders may levy exit fees if you pay off your loan during the first three to five years of its term. However, this generally only applies to mortgage loans taken out and processed on or before July 2011.

The cost may be determined as a fixed charge or as a percentage of the outstanding debt, depending on the lender.

Stamp Duty

If you refinance and raise the loan value, you may be subject to a stamp duty fee. We can assist you in determining if this is applicable and, if so, what the sum would be.

Mortgage Registration Fee

The Mortgage Registration Fee is another fee you may have to pay. This is paid to your state's Land Title Office (or similar) and is used to register the mortgage on the title record.

It may be wise to not refinance sometimes

Depending on your specific financial situation, you may be better suited sticking with your present lender rather than going for refinancing. The following are some cases in which it would be unwise to pursue a refinancing.

Paying to get out of your old loan might be expensive

Your exit fees may exceed the benefits of switching. Exit costs will be eliminated in the future, but until then, it may be advisable to stick with your existing lender.

There is not sufficient equity

Lender's Mortgage Insurance is required when the borrower has insufficient equity in the property (20 percent or less of the value). The expense of LMI may render the potential savings from switching to a lender with a lower interest rate null and void, depending on the level of equity you currently have in your home.

To maximise the financial advantage of refinancing, it is typically preferable to wait until you can avoid LMI in such a case.

Home renovation projects may boost your home's value and hence your equity. You may be able to lower the principal balance of your loan and boost your equity by making extra payments.

Lenders will look at your current repayment history and projected income when considering a refinance. There are lenders that may not approve a refinancing if you have a history of defaulting on debts or making bill payments late, so you may want to wait until that's taken care of before applying. You may also find a difference in who would refinance with you and/or the interest rate offered if you have changed jobs or become self-employed.

Change in income/situation

Lenders will look at your current repayment history and projected income when considering a refinance. There are lenders that may not approve a refinancing if you have a history of defaulting on debts or making bill payments late, so you may want to wait until that’s taken care of before applying. You may also find a difference in who would refinance with you and/or the interest rate offered if you have changed jobs or become self-employed.

How your mortgage broker can help?

Of course, you’re free to pursue mortgage refinancing on your own if you so want; but, doing so will require a lot more work on your side and, if your application is denied, may affect your ability to qualify with other lenders.
Some of the advantages of cooperating with us are as follows.

Honesty & Transparency

We'll break down every fee and charge from your lender so you know exactly what to anticipate from your savings.

Goals and Objectives

We will take the time to learn about your current and future financial goals and objectives in order to better serve you throughout the refinancing process.

Financing Options

We'll show you several loan options that can help you pay off your debt faster.

Keep You Updated

We will keep you updated on the progress of your loan throughout the whole process, from application to settlement.

Save Tme

We'll help you save time by submitting your refinancing application to the lender of your choosing after you've made your selection.

In addition to our proficiency, you also gain from the fact that our service is provided at free cost. You may be certain that we will work tirelessly on your behalf throughout the loan process, since we only get paid by the lender you choose once the loan has settled.
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Top 5 Home Loan Mistakes

Top 5 Home Loan mistakes to avoid before you take your next Mortgage!

Get The Book
Unlock Property Wealth

Join our Free Facebook Group where we share all the tips and tricks for saving thousands on your mortgage and paying it off sooner.

Join Home Loan Academy
Talk to a Home Loan Expert

Get your queries answered by our experts today! Unlock your financial potential & achieve your goals sooner.

Book Free Appointment