Refinancing your home loan can help save your money in the long run, offering benefits such as lowering your interest rate or accessing equity to our property’s Loan to Value Ratio (LVR ). A lower LVR can help increase your chances of getting a better interest rate, as the risk to lenders is reduced.
Let’s learn how it works! Why you should consider it, and the potential benefits and drawbacks of refinancing.
Benefits To Refinancing:
- Potentially Lower Your Interest Rate
- Potentially Reduce Monthly Payments
- Consolidate High Interest Debt
- Switch to a Fixed or Variable Loan
Things To Consider:
Any upfront costs associated with moving to a new lender that may include:
- Application Fees
- Settlement Fees
- Valuation Fees
- Registration Costs
- Lenders Mortgage Insurance – if applicable
Review Your Current Home Loan
Firstly, take a look at your current home loan by reviewing your interest rates, fees and ongoing charges. You can check this in your home loan contract, internet banking or on your statements. You will need to explore the fine print.
Once you know what you’re working with, you can see if it’s worth refinancing. By becoming more equipped to make informed decisions you can start working your way towards potentially saving yourself money in the process.
If you are in any doubt, call your lender and they can help assist you.
Compare The Market
When it comes to finding a home loan and getting the best rate, it's important to do your research and compare different lenders to determine the right type of home loan for you.
There are also other convenient tools available, like our Compare Loans Calculator, that can help you compare loans.
What is Loan to Value Ratio (LVR)?
The Loan to Value Ratio (LVR) is calculated by dividing the loan amount by the value of the property, as assessed by the Bank or a Licensed Valuer. When talking about home loans, the LVR is simply the home loan or investment loan amount divided by the value of your property. It helps determine the amount you can borrow based on the property's worth.
The lower your LVR, the lower the risk for the bank. Most financial lenders in Australia consider loans with an LVR over 80% as a higher risk.
How to calculate your LVR
The LVR is calculated by dividing the loan amount by the property value.
Loan amount ÷ Property Value x 100 = % LVR
If the property is valued at $600,000 and the borrower has a loan of $480,000, the LVR would be 80%.
$480,000 ÷ $600,000 x 100 = 80% LVR
It’s important to know that for LVR purposes, the value of a property is determined by an up-to-date property valuation (a formal, legally binding assessment of a property’s value) and not the market value (purchase or advertised price). There may also be a price difference between a property valuation and the market value of a property.
Lender's Mortgage Insurance
You might be wondering what does Lender's Mortgage Insurance (LMI) have to do with refinancing? Well, if you have recently purchased a property with less than a 20% deposit there is a chance your property could have more than 80% LVR.
If your LVR is above 80% you will have to pay LMI if you’re thinking of switching financial providers. Even if you paid it when you initially purchased your property. To avoid this, keep an eye on your property's value and wait for it to increase, or reduce the amount you owe on your home loan before considering jumping into the refinancing game.
Contact Your Current Lender
If refinancing isn't on the table, don't worry! Reach out to your current lender and see what they can offer you.
If you already have Regional Australia Bank Home Loan we have a dedicated team, who can help assess your current situation.
Lastly! It’s Time To Refinance
Once you've taken the time to explore all your options, it's important to consider all the factors of switching lenders. Taking into account the expenses of exiting your current loan and the upfront costs associated with moving to a new lender. When you're ready to refinance your home, take the next step and get in touch with your new lender.
We’re committed to regional Australians. If you decide to choose Regional Australia Bank, we'll be there every step of the way to help you navigate the world of home loans and strive to make the process as easy as possible. When you grow, our region will, too.
To find out the best rate we can offer you, speak to your local Home Loan Specialist today or view our great home loans.
