4 things you might not have considered about a refinance

A mortgage refinance is a common process for many Australian homeowners, but it can seem daunting if you don't completely understand what's required of you. Given that there are multiple reasons for refinancing your existing home loan, this is perfectly understandable. 

Here are four things you may not have considered about a mortgage refinance. It may just be the case that a refinance suits your needs. However, a mortgage is a big commitment, so it's important to thoroughly understand the terminology and procedures in order to make your loan work for you. 

More financial confidence

If you're weighed down every month due to hefty mortgage repayments, refinancing your loan can help your financial confidence levels.

When you feel like you're not in control of your mortgage, this can quickly leave you unconfident about your entire financial situation. From car repayments to monthly electricity bills, it's not difficult to feel overwhelmed by what you're forking out month to month.

A mortgage refinance can give you a better sense of financial control, which is a lot healthier for your long-term well-being. For instance, you might switch to a fixed-term rate to get more certainty about your repayment amounts.

Show your history

When you apply for a mortgage refinance with a new lender, you'll need to provide proof of your ability to make your loan repayments.

You can provide documentation that demonstrates your consistent repayment history with your current lender. While you still need to jump through the necessary hoops, if you've had your current mortgage for some time, you may find it easier to prove yourself as a worthy borrower.

Remember, lenders have to do their due diligence whether they're dealing with first home buyers or seasoned investors. However, being able to demonstrate your ability to pay may make the process that much easier.

Undergo renovations

Did you know you can take out a mortgage refinance in order to improve your property? For many homeowners, the motivations behind a refinance are not limited to obtaining a more favourable home loan rate.

By refinancing, you can get certain features, such as a line of credit. With this, you can draw funds up to a specified amount in order to complete renovations on your home.

This can be a great option for young families who don't want to leave their existing home, but need to create more space. Perhaps children have settled into local schools or a good bond has been established with the neighbours. If this is the case, renovating may be a better option rather than having to go through the selling and buying process.

Whether you want to add a pool or remodel your living space, there are plenty of options available. However, consider how much value your planned additions will add to the property. An extra bedroom or a new kitchen are popular renovations that can be incredibly valuable, but creating an outdoor spa area may not be such a worthwhile investment.

Making payments

Once you've organised a refinance, it's important to know what options will be available to you to make your repayments.

Fortunately, there are many ways to ensure you pay what you need to, whether it's on a fortnightly or monthly basis.

Be sure to chat with your lender about your payment options. Many lenders will offer you easy access to information relating to scheduled payments as well as those which you've already made.

Setting up a direct debit is a wise way to manage your ongoing loan obligations, as the payments are automatically withdrawn from your nominated bank account. This means you've got less to worry about. It's a smart idea to have your salary or other form of income go directly into this account.

Image credit: Leonardo Pallotta

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