Discover the different types of refinancing options in Australia and find the best strategy to reduce your mortgage or access home equity.
Here are some of the most common refinancing options available:
Rate and Term Refinance
This is one of the most popular forms of refinancing, aimed at securing a better interest rate or altering the loan term.
Objective: Adjust the interest rate or loan term to secure better terms.
Process: Replace the existing mortgage with a new one that offers a different interest rate, loan term, or both.
Benefit:
Reduce your monthly repayments by securing a lower interest rate.
Shorten the loan term, potentially saving thousands in interest over the life of the loan.
Rate and term refinancing is often chosen by homeowners who want to benefit from a more favorable interest rate environment or reduce the time they are paying off their mortgage.
Cash-Out or Equity Release Refinance
This type of refinancing allows homeowners to access the equity in their home as cash, which can be used for various financial needs.
Objective: Access your home's equity as cash for major financial goals.
Process: Refinance your existing mortgage for an amount greater than your current loan balance, and receive the difference as cash.
Benefit:
Use the funds for home renovations, education costs, or debt consolidation.
Potential to increase property value through home improvements.
A cash-out refinance can be particularly helpful if you need liquidity for large expenses while still maintaining homeownership.
Cash-In Refinance
In contrast to a cash-out refinance, a cash-in refinance allows you to pay down part of your loan balance.
Objective: Pay down the existing mortgage to achieve better loan terms.
Process: Homeowners bring additional cash to the table at closing to reduce the loan amount and improve their loan-to-value (LVR) ratio.
Benefit:
Potential for lower interest rates.
Reduce your monthly mortgage payments.
Eliminate Lenders Mortgage Insurance (LMI) if your LVR falls below 80%.
This option is ideal for homeowners who have saved additional funds and wish to reduce their loan amount to secure better refinancing terms.
No-Closing-Cost Refinance
This type of refinancing is designed for homeowners who want to avoid paying significant upfront costs.
Objective: Avoid out-of-pocket expenses when refinancing.
Process: The lender covers closing costs, either by offering a slightly higher interest rate or rolling the costs into the new loan balance.
Benefit:
Reduce the immediate financial burden of refinancing.
Make refinancing more accessible without a large cash outlay.
While this option helps you avoid upfront costs, it’s important to weigh the long-term costs associated with a potentially higher interest rate.
Hybrid or Split-Loan Refinance
A hybrid refinance combines elements of both fixed and variable interest rates, offering homeowners a blend of stability and flexibility.
Objective: Combine the benefits of fixed and variable interest rate loans.
Process: The loan typically starts with a fixed rate for a set period, followed by an adjustable rate for the remainder of the loan term.
Benefit:
Enjoy stability with predictable payments during the fixed-rate period.
Potentially save on interest during the variable-rate phase if market interest rates decrease.
Hybrid loans offer a balance for borrowers who want the security of fixed rates but are willing to take advantage of market conditions if rates fall in the future.
DISCOVER MORE >
Which Refinancing Option is Right for You?
Talk with one of our business finance experts who can guide you through the process and help find the best solution tailored to your needs.
Call us on (02) 8313-8400 or request a call back.
Comentários