Refinance and Cash-Out Refinance
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Want to refinance your current home loan with a better interest rate, loan type, loan features and pay less repayments?
Perhaps your financial circumstances have changed, that you need a different loan catering better to your situation?
Need cash to buy another house, invest and build wealth (such as buying shares), renovate, or to pay off debt, have a holiday and focus on health?
By Refinancing, you pay out your current home loan by taking out a new loan:
- Refinance to a different, better lender.
- Refinance with your existing lender (for a better loan option deal we negotiate with them for you).
Refinance Purposes and Benefits:
- For $$Cashback in your pocket- Lenders often offer thousands of dollars during their cash back promotions to persuade and reward you to refinance with them.
- For a lower interest rate % and pay less interest.
- For switching your home loan between Variable/Fixed rates. Switching to Fixed rates if the Cash Rate set by the RBA (Reserve bank Of Australia) is forecasted to keep going up, then switching back to a lower Variable rate when the RBA cut the Cash Rate (RBA Cash Rate affects the interest rates set by lenders).
- For Lower monthly repayments, or for more flexible repayments
- For better Loan Features such as Loan Splitting into a portion in Fixed Rate and the rest in Variable Rate to hedge against interest rate rises, Offset Account to reduce your daily interest, Redraw Facility to access money for expenses or investments, Extra Repayments to pay off your loan faster, and for other helpful Loan Features – Click/See our Loan Features page for more info.
Cash-Out Refinance (Get a bigger Loan to get Cash)
Cash-Out Refinancing has all the benefits of Refinance as listed, the difference with Cash-Out Refinancing being: Closing/paying off your existing Home Loan to move to a bigger Home Loan, so you can receive the difference in cash.
Cash-Out Refinance enables you to borrow against the Equity in your home to Cash-Out:
- For financing investments such as another property purchase, renovation, other investments like shares, managed funds etc.
- For personal use such as holiday, medical bills, school fees, quality family time etc.
- For Debt Consolidation as having a home loan, a personal loan, a car loan or a credit card means lots of different repayments under multiple debts. With the home loan most likely the one with lowest interest rate charged, you can refinance the high interest multiple debts into one lower interest debt.
The amount of maximum cash depends on how much Equity you have built up.
- Increased loan repayment option– as you are increasing your home loan total debt, you may opt for increased repayments to pay it off.
- Extended home loan term option– if you don’t increase loan repayments, then your loan term could be extended so you don’t pay increased repayments (but pay over a longer period of time to pay off the bigger debt).
- Interest on the new bigger loan might be higher depending on situation (such as if your LVR changed).
Refinance Costs
- There may be some costs depending on your current loan such as Fixed Rate Break Fees (if current loan is on a fixed rate), so we carefully evaluate the benefits versus any costs to make sure it’s worth refinancing.
- Depending on the lender, but you would likely need another property valuation.
- Generally, lenders view usable Equity as (80% of your home value minus current outstanding loan balance). Therefore, if equity used is over 80%, you would need to pay LMI (Lenders Mortgage Insurance) again.
For example, if:
- Your home value is currently worth $1,000,000,
- You owe $600,000 outstanding on your loan,
- 80% of home value is 80% of $1,000,000 = $800,000
- $800,000 – $600,000 = $200,000 Usable Equity
- Based on the above, your Loan to Valuation ratio (LVR) is 60%
(LVR = loan amount divided by/value of property).
Your borrowing is only 60% of the property value, which is good for not paying LMI).
- You need to leave the rest 20% of the Equity for the lender as security, if the lender does not get to keep at least 20% Equity, then either your loan is rejected or LMI would apply, so you should aim for the total borrowing to be less than 80% as you wouldn’t want to pay LMI
We carefully calculate based on your situation, any upfront fees, ongoing fees, discharge fees and any other closing costs involved to assess whether it works out better for you to refinance, and not just based on another lender’s competitive interest rates.