Refinancing an existing home loan is often a good option provided the borrower finishes up better off in terms of repayments, interest rates and fees and charges.

 The main purpose for refinancing an existing home or investment loan is to restructure borrowers current loans to obtain a better loan product and services. The reasons to refinance can cover any number of issues including reducing or streamlining repayments, consolidating debts and other loans, obtaining lower interest rates or fees and charges. A borrower may be unhappy with a current lender and wish to take their lending business to a new lender.

 It is not that difficult to refinance a current loan provided that loan has been well maintained. If a borrower has a good track record with loan repayments and the income to service loan commitments they should not have much trouble in refinancing. Lenders are always keen to refinance existing loans to gain new business.

 The question the borrower needs to have answered is “are they better off?” Interest rates and fees and charges on the current loan should be compared with the new loan. Fees already paid on an existing loan should be considered especially Lenders Mortgage Insurance, as this fee will not be transferred across to the new loan. Partial rebates on Lenders Mortgage Insurance are mostly only payable in the first twelve months and then only for about 40% of the fee paid. Another fee to watch for is the exit or early repayment fee on the existing loan. Lenders have these exit fees on many loans that are paid out in the first three to five years. If the existing loan has a Fixed Interest Rate a penalty could apply for the refinance of the loan. The State Government allows the transfer of mortgage stamp duty with refinanced loans so borrowers should ensure their new lender will assist with the transfer of mortgage stamp duty.

 Rather than go to an individual lender a borrower considering refinancing is well advised to use the services of a broker with access to many lenders, a loan broker with integrity who will advise them on their best option. It may well be that refinancing may not be in the best interest of the borrower. Above all borrowers should be aware of telemarketers who offer ways in which a home loan can be paid off quicker only to find out after their loan has been refinanced that they are paying a higher interest rate and extra fees have been added to their new loan.