Time to make switch

IF you've had a home, business and/or personal loan for some years, and your financial circumstances have changed since you first signed on the dotted line, your loan could be ripe for refinancing.

Refinancing, or switching, generally refers to the process of replacing your existing loan with a new loan from the same or a different lender.

It makes good financial sense to check if your existing home loan offers a competitive interest rate, charges minimal fees and offers useful and value-for-money features suited to your lifestyle and needs.

It is important to do your research and weigh up the pros and cons before making the decision to move.

So, before taking steps to replace your existing loan with a new offer, consider my eight-step checklist to refinancing.

1. Head into the decision knowing why you want to refinance. Borrowers should have clear reasons in mind as to why they want to refinance. This will probably make a difference to the type of loan you refinance to.

2. Weigh up the cost versus benefit of refinancing. Borrowers should factor in possible costs such as application fees, lender's mortgage insurance, mortgage registration fees and break costs. Once you have researched your loan options, it is not uncommon to find that the right loan for your needs and circumstances is, in fact, your existing loan.

3. Take the time to shop around. Make time to do some of your own research and compare your home loan to other loan options available.

4. Don't dismiss smaller, lesser-known lenders. Keep in mind many smaller lenders such as credit unions and building societies also offer competitive deals in terms of interest rate and the available features and fees charged.

5. Interest rate is not everything. A home loan's interest rate is only one factor to consider when refinancing. It is just as important to weigh up other loan factors such as the loan's fees, features and flexibility.

6. Have a realistic expectation of your property's market value.

7. Know that changes in your financial situation can impact on your borrowing ability. If your financial circumstances have changed since you took out your existing loan, you may find that a lender won't approve you for the same loan amount. In these situations it is always a good idea to be upfront with your mortgage broker or lender.

8. Be prepared to submit new loan documentation. Every time you apply for a home loan you will probably need to submit a range of paperwork to show evidence of your current income, expenses, assets and liabilities.

For more information phone Richard Windeyer on 1800 01 LOAN.

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