Refinancing Home LoanInteresting Refinancing Home Loan Articles

Home Loan Refinancing is the most popular (and ever growing) loan type in Australia’s home loan marketplace.

Refinancing a Home Loan or Mortgage basically means to take out a new loan (usually with a different bank or lender) and use these funds to pay out the old loan. Typically this is not a difficult process, with the right kind of assistance.

In a recent survey conducted by Mortgage Choice it was found that Home Loan Refinancing accounts for 34% of all the mortgage applications processed in Australia. When you think about it this is a logical step because over time borrowers needs and circumstances change, and they require their Home Loans to adapt with them.

Reasons Why Borrowers Refinance Their Home Loan

Australian Home Loan borrowers often consider refinancing for many varied reasons including:

Debt Consolidation – to reduce both the amount of interest being paid, and the repayments that are required. This also makes it simpler to manage as there is usually only one fortnightly or monthly account to pay afterwards.

Changes in personal circumstances – such as starting a family or getting a new job, or moving out of the property.

Need to access extra funds – if you need to pay for a new car, a big holiday, home renovations, an investment property, buying shares or for education expenses.

Not being happy with the current loan or lender

To change the term of the loan – the borrower may now be in a position to make extra payments and wants to utilize an accelerated payment schedule.

To reduce borrowing costs – say no more!

To switch from a variable interest loan to fixed or vice versa

To minimise tax – where the current borrowing arrangement is inappropriate

To assist in a separation or divorce

To start or purchase a business

Should You Refinance Your Home Loan?

As we have outlined above there are many reasons why Australian borrowers choose to refinance their mortgage. Mortgage Choice has developed a Refinancing Checklist to raise some issues that are not always considered. The aim of the Refinancing Checklist is to help you make an informed dicision.

WARNING!
There are dangers in unnecessarily refinancing or “churning” your mortgage. Churning is a term that refers to a finance provider refinancing a borrower even when it is not beneficial to the borrower and occurs at the expense of the borrower. It is crucial that borrowers fully understand exactly why they are refinancing, and also to calculate the overall savings achieved through this process.

The Costs Associated With Refinancing

Time and some mental exertion are two of the big costs associated with refinancing, but it’s pretty difficult to place a dollar figure on these two things. As far as the fees and charges which are payable when refinancing it differs from state to state in Australia, but on an average size loan ($215,000) the cost of refinancing is approximately $1,000. This cost is generally rolled into the new Home Loan so there are no “out of pocket expenses”.

Some of these refinancing costs can include the following:

Discharge fees to exit the old loan.

Registration fees for the new mortgage.

Loan Stamp Duty (not applicable in Victoria, Northern Territory and A.C.T)

Account fees

Lenders Mortgage Insurance

Valuation fees

Early payment fees

The most important issue is that you know the genuine costs of refinancing, and the features and benefits of the new loan, so that you can evaluate the benefit refinancing provides.

TIP:
It can pay to ask the new lender if they are prepared to contribute to these refinancing costs. If they are keen to gain new clients they may offer some help.

How To Refinance Your Home Loan

Using the services of a good Mortgage Broker can reduce the time taken to refinance, and also provide some certainty as to the end result. A competent Mortgage Broker will assess your borrowing requirements and assist in comparing your current home loan with one or more alternative offerings. When a refinance is chosen as the most suitable alternative, your Mortgage Broker will do all of the “leg work” required to arrange a suitable refinance. This is at no cost to the client, as brokers are paid for this by the lender chosen.

TIP:
Always keep in mind that it is overall cost and loan suitability which are the most important factors when refinancing, not necessarily just a lower interest rate (although it does help).

If you need to refinance, a home equity loan lest you cash in on the value you have built up in your home. The amount of equity is the difference between what you owe on your mortgage and what your home is worth on the real estate market. This option for refinancing is really great for homeowners who have been paying on their mortgage for quite some time and have a significant amount of the principal of the loan repaid. With a home equity loan, you can usually get about 80% of the equity as a loan.

The money you get through a refinance home equity loan is yours to do whatever you like. If you want to make further improvements to your home, then you are building up even more equity. There are some lenders that will approve a home equity mortgage loan where you don’t have to make any payments as long as you still live there. When you sell the home you have to repay the loan in full, plus interest of course. If you die, then your estate is responsible for the repayment.

As with a mortgage, your home is the collateral when you refinance. Loan payments have to be made each month, which could mean you have two mortgage payments to make. You have to make sure that you can afford this before you jump into it and the lender will require you to have an excellent credit record. If you default on the payment for the home equity loan, you could lose everything you have worked so hard for.

Many homeowners use the option of refinance in a home equity loan to consolidate all their bills. Then they use the total of the payments they were making each month to make the payment for the loan. Most of the time, this amount is much less than the total of all the other payments, giving you cash to work with each month. The rate of interest on a home equity loan is much lower than a normal loan and in some cases the interest may be tax-deductible.

When you want to refinance, a home equity mortgage loan has two options for you to choose from. You can have a fixed-rate loan where you make fixed monthly payments each month for a specified term. You can also have an adjustable rate line of credit with a home equity loan. If you choose the fixed rate option because you want to be able to budget each month, once you pay the loan in full, you cannot get another home equity loan. This is a one time thing. However, with a home equity line of credit, you can use the money over and over.

When you repay the line of credit, you can borrow money on it as you need it. You don’t have to have it repaid in full to do this and can use it as you see fit. You only pay the interest each month on the outstanding principal and you can pay it off in full whenever you want.

One of the best ways to purchase the home of your dreams is to pre-qualify for a home loan. In this age of recession when there are so many house closures occurring around everywhere, some people are trying to take advantage of the situation and are hunting for some exciting real estate bargains. If you are still renting a home and always lived a dream of having your own home, this can be the right time to put some serious efforts and turn your dreams into reality. In order to find out whether you are eligible for pre-qualification or not, you will first have to submit an application to the bank or the financial institution providing all the information that it requires. The mortgage company will review your application and then decide whether they should approve the same. Following are some of the important components of the application where you have to put your focus on.

Details About Your Landlords
If you have been living in rental houses, you will have to provide the details of the landlords that you dealt with in the last two years. While you are filling out the application form to pre-qualify for a home loan, you will have to mention the names and addresses of all those lenders.

Are You Divorced?
Those who are divorced will be required to enclose all separation agreements and the divorce decree along with the application.

Employment Verification
Employment verification is also an important part of the process while you are filling out the application form. The first condition is that you must be currently employed. Otherwise, you will not be able to qualify for pre-qualification. Besides that, your overall working experience must be at least two years. In order to pre-qualify for a home loan, you will have to provide the names and addresses of your employers that you worked for in the last two years. You will have to provide this information along with W2 and 1099 forms. The process also requires you to enclose copies of your most recent salary slips for the last couple of months. If you have been working as a self-employed professional, you definitely cannot submit your salary slips because you are not drawing any salary. So, in that case, you will have to provide the copies of your tax returns for the last two years. You will also have to provide the copies of the profit and loss statements for the same period.

Financial Information
The application form to pre-qualify for a home loan requires you to provide all your financial information, including investments in stocks and 401(k). You will have to provide the details of your assets and liabilities along with the bank account details. If you have more than one account, you will have to provide all those account numbers along with the bank names. Most importantly, a copy of your current credit report must be attached with the application, which can be one of the major deciding factors.   

Once you pre-qualify for a home loan, it will be very easy for you to find the best deal at much lower rates and more favorable terms than usual.

Benefits of Taking Home Loan Bankruptcy Bad Credit

Are things already on its worst?

If they are, then i tell you, you are not alone. Many have exclaimed the same statements but no matter how rotten things can be overwhelming at times; you must remember though that there is still hope.

When it comes to getting home loan bankruptcy bad credit, the hope lies in the fact that there are already various lenders and resources that can be found just around the corner if you will only search for them.

To give you moral support on your application for home loan bankruptcy bad credit, I have listed below the advantages of getting one. And hey, just so you would know, what you did is a wise decision.

#1.

Try making your payments on time so that you can rebuild your credit score. You must know that all of your payments towards the loan will be directly reported to the credit bureaus in your state. So if you will just make your payments promptly, you are going to find out that you can improve your credit score easily.

# 2

You’re applying for home loan bankruptcy bad credit, right? Then I advise you that you develop some equity in your house as that could prove beneficial for you. Added to that, never forget to make prompt payments towards the home loan as that could help you develop it. I tell you, it will be very useful for you in the long run.

# 3

If you followed step 2, then after you have built enough equity, you can already apply for a home equity loan. I tell you that you won’t have any problem in getting a lower interest rate.

Now, let’s come to what lenders require of you when you are applying for home loan bankruptcy bad credit.

Most of the lenders are requiring that your bankruptcy should have been discharged past two years once you apply for the said loan. It could also impress them more once you have filed a bankruptcy under chapter 13.

You should’ve also made your payments promptly over the past few years as most of the lenders will look into your payment history for the waiting period to see if you are being responsible with your payments. If you have taken a new credit, they will also scrutinize how you have been paying the newly acquired credit.

Remember that your income, loan to value ratio, debt to income ratio, and value of your assets will also be assessed.

Once you apply for a home loan bankruptcy bad credit, you must first arrange for a down payment amount of at least 7-10% of the value of the loan so that the lender will have an assurance. Aside from that, you must prepare quite a sum because definitely, you will be charged with a higher rate so better assess the budget that you have so as to make sure if you can meet the payments.

An important thing to remember is that you must carefully research lenders before you apply and get quotes first before you choose the one you think is best.