Refinancing by xiuliliaofz


									Refinancing                                                                                                                    How to access equity
                                                                                                                               in your current home
                                                                                                                                                                                                New loans – what to look for
                                                                                                                                                                                                • Weigh up the rates, over other features and benefits
What you need to know                                                                                                                                                                             you may need.

What’s refinancing?

Refinancing is simply trading in an old                                                                                                                                                                What kind of rates are available

mortgage for a new one by moving your
                                                                                                                                                                                                         Basic variable rates
home loan to a different lender.


                                                                                                                                                                                                         Standard variable rates
                                                                                                                                                                                                         Fixed rates for peace of mind
  Why refinance?                                                                                                                                 OF EQUITY                                              Honeymoon rates, receive a 12 month disco
                                                                                                                                                 AVAILABLE                                              although some can be longer
                                                                                                                                                                                                                                                  unt on rates
  • reduce monthly payments by getting
    a lower rate                                                                                                                                                                                    Features and benefits
                                                                                                                               You can borrow against the equity that
  • consolidate credit cards, personal loans or                                                                                                                                                       Redraw facility: redraw extra payments
                                                                                                                               you have in your home, which is the                                                                                 at any time.
    other debts to get a lower interest rate and                                                                                                                                                       Offset accounts: deposit your salary
                                                                                                                               difference between the value of the                                                                             etc into an
    reduce overall monthly repayments                                                                                                                                                                  account that is linked to your home loan
                                                                                                                               property and what you owe on the                                       interest you earn on the money banked
                                                                                                                                                                                                                                                  account. Any
  • finance home renovations or extensions by                                                                                  home loan. Lenders will typically lend                                the interest paid on the home loan acco
                                                                                                                                                                                                                                                is offset against
    tapping into the equity in the existing home                                                                                                                                                                                               unt.
                                                                                                                               up to 80% of valuation or 90% with                                   Professional packages: discounts on
                                                                                                                               Lenders’ Mortgage Insurance.                                                                                  your home loan
  • get a home loan with more suitable features                                                                                                                                                    fees, rates, credit card and other acco
    such as redraw facility, offset account etc.                                                                                                                                                  Ability to make extra repayments: make
                                                                                                                                                                                                                                                extra repayments
                                                                                                                                                                                                 on principal without incurring any pena

         What it costs
                    OLD LENDER                                                         NEW LENDER
        Discharge of Mortgage Fee                                            Home Loan Application Fee                                                        Before you refinance consider carefully………
        Approx $350                                                                       Approx $600                                                         • The savings you may make vs fees and charges, including stamp duty

                                                                                 Valuation Fee (of the property)
                                                                                                                                    STOP                        and mortgage insurance
                                                                                                                                                              • Upcoming changes in lifestyle or work like a baby or extended holiday
        Deferred Establishment Fee                                        Usually included in application fee
        $700-$1,000                                                                                                                                           • Trading in useful features such as offset accounts for a lower rate
        (if loan cancelled in first 4 years)                                                   Settlement Fees
                                                                                              Approx $100 - $300
        Break Costs (fixed rate loans)
        Depends on the size of the loan                                   Registration of Mortgage Fees                        What people say about refinancing
        and current interest rates                                              Varies by state government
                                                                                                                                                                                                                                                      45% used a
                                                                                                       Stamp Duty                                                                                                                                     mortgage
                                                                                                                                   46%                                                                                       45%
        Loan - Legal Fees                                                                                                                                 paid no exit
                                                                                (if you borrow more than your original loan)
        Approx $250 - $500                                                                                                                                fees upon                                                                                   broker to help
                                                                         Varies by state government and the                                                                                                                                           them refinance
                                                                                        purpose of the funds                                                                                                                                          their loan
                                                                          Lenders' Mortgage Insurance
                                                                         Usually for LVR > 80%. The cost can
                                                                                                                                  The main motivation to                                                                                             89% of
                                                                         be as little as a few hundred dollars
                                                                                                                                  refinance was to                                                                                                   respondents

                                                                                or into the tens of thousands
                                                                                                                                                                                                                                                     had no regrets
                                                                         NB: Be sure to check fees, as they                                             A
                                                                                                                                             SWITCH TO AN
                                                                                                                                                                                                                                                     about their
                                                                                 vary from lender to lender
                                                                                                                                            CHEAPER  LO                                                                                              decision to

         Potential savings                                                                                                                                68% saw their

                                                                                                                                                          interest rate                                                      
         On a $300,000 principal and interest loan with an 8.3% p.a. interest rate, you save approximately                                                drop upon
         $50 per month for every 0.25% discount you can negotiate on your rate.                                                                           when they                                                          BLOG

                                                                                                                               From Mortgage Choice Refinancers Survey: Survey of 1,028 Australians who had refinanced their home loan during the 12 months to August 2010.

                                                                                                             $308.57           What does it all mean?
                                                                                                                               Break Costs                                                              Establishment Fee
                                                                                                                               Charged when you pay out a fixed rate loan early. These                  A fee charged by a lender to set up a loan.
                                                                                         savings                               charges depend on the remaining term and current rates at                Exit Fees
                                                                       $207.64                                                 the time you pay the loan out. It also includes an
                                                                                                                                                                                                        Fee charged by a lender to exit a loan – usually for a fixed
                                                                       savings                                                 administrative cost incurred in releasing the loan early.
                                                                                                                                                                                                        rate mortgage. Can be “deferred establishment fee” or
                                                            $156.43                                                            Deferred Establishment Fee                                               “early repayment fee”.
                                                            savings                                                            A fee charged by a lender when you pay a loan out before a               Lender’s Mortgage Insurance
                                                                                                                               specified period.
                                                                                                                                                                                                        A premium charged by a lender when the Loan to Valuation
                                                 $104.74                                                                       Equity                                                                   Ratio is higher than 80%, for an insurance policy which
                                                 savings                                                                       The difference between what you owe on the loan, and the                 covers the lender if the property needs to be sold due to loan
                                       $52.60                                                                                  current valuation of the property.                                       default and there is a shortfall of funds to repay the loan.
 Rates Repayments

                                       savings                                                                                 The amount of an asset not subject to any lender's interest              Loan to Valuation Ratio
                                                                                                                               e.g. property worth $300,000, with a mortgage loan of
                                                                                                                                                                                                        The ratio of the amount lent to the valuation of the security
                                                                                                                               $150,000 - equity is $150,000.
                                                                                                                                                                                                        (ie. the property). Commonly called LVR. An example would
                      $2264.35        $2211.76   $2159.61   $2107.92   $2056.71         $2005.99            $1955.78
                                                                                                                               Equity Loan (or Line of Credit)                                          be a loan of $120,000 on a home valued at $130,000. The
                                                                                                                               It usually operates like an overdraft, where the borrower has            loan to Valuation Ratio is $120,000 multiplied by 100 and
                                                                                                                               a set credit limit to which they can draw funds and repay at             divided by $130,000 - 92.3%.
                       8.30%            8.05%     7.80%      7.55%      7.30%             7.05%               6.80%            any time.

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