Start with your current lender and compare against the market.
Compare Rate & Fees – Check Terms – Check Company Reviews & Licence
Credit History/Score – Proof of Income – Debt to Income Ratio
Refinancing your home loan is simply changing your current loan for a new one with your bank or a new lender.
Popular reasons for refinancing include debt consolidation, cash out for renovations or other purchases and rate reduction to save on interest.
For the purposes of debt consolidation there are numerous things to consider in order to ensure refinancing is beneficial to you.
Below are reasons to consider a mortgage refinance for debt consolidation:
A mortgage refinance isn’t right for everyone. There is a qualification process for borrowing and the risks include:
When refinancing for debt consolidation, most types of debts can be paid off. Examples include:
Other debt consolidation solutions such as balance transfers, are primarily for credit and store cards.
General qualification criteria are the same as the original loan:
Each credit provider or lender will have its own approval process and criteria. The above highlight the minimum requirements most lenders require.
| Mortgage | $350,000 | $1,889 |
| Credit Card | $5,000 | $125 |
| Car Loan | $10,000 | $250 |
| Personal Loan | $8,000 | $188 |
| Store Card | $5,000 | $137 |
| Payday Loan | $1,500 | $226 |
| Medical Bill | $8,000 | $180 |
| Total Owed | $387,500 | $2,995 |
A consolidation loan of $390,000 with a interest rate of 3.5% over 30 years would change the total monthly repayment of $2,995 to $1,761.
A difference of $1,234 a month or $14,808 a year.
Depending on the lender it may be possible to refinance your home loan whilst having poor credit. However the rate provided may not be beneficial, as rates attached to impaired credit tend to be higher.
If considering a new loan, make sure there is a real short and long term benefit to you.
The motivation behind refinancing is different for each person/family. General benefits of refinancing a home loan include:
See our section on “How It Works” to see drawbacks.
The amount you can refinance will depend on the amount of equity you have built up in your home, and in relationto a lender’s max Loan to Value Ratio (LVR).
As an example, if a lender has a max LVR of 95%, then they will only let you borrow up to 95% of your home’s value.
There are other options to access your home equity if your are uncomfortable with refinancing. In some instances, people with offset accounts utilise this feature to access cash.
Other options can include a home equity line of credit or home equity loan.
Finding the best refinance deal is dependent upon what is available in the market at the time. Your particular financial situation also influences your options.
A common savings tactic used by many is to review the market via comparison sites or broker sites for deals relevant to their situation, then using that information to negotiate a better deal with their existing lender.
