Refinancing Loan Options

When you refinance, there are many different loans and rates to consider. There is no one-size-fits-all approach to refinancing, but it’s a good idea to give your home loan a health check every so often. This is because the loan you originally chose may no longer be right for you as your circumstances may have changed over time.

When you originally chose your loan, you were probably introduced to the different types of home loans available and their interest rates. It’s always a good idea to take a refresher when you’re considering refinancing. There may be an option available now that wasn’t when you first took out a loan; refinancing can be a smart move if interest rates have dropped since then. My LMI Group brokers are here to crunch the numbers, so they can help determine if refinancing is right for you.

When you’re looking to refinance, it pays to compare rates. However, it is important that you remember that the loan with the lowest rate may not be suitable for your needs. Your My LMI Group broker can help explain the big picture when it comes to different loans and rates so that you can choose a loan that’s right for you.

Refinance Options

The following is a quick guide to some of the loan types and terms you are likely to encounter when refinancing.

Standard vs Basic Home Loans

A basic home loan is a type of home loan that comes with a lower rate than a standard home loan. Because you will receive a lower rate on this type of loan, you could expect fewer features than you would with a standard home loan.

The term “basic” is used differently by different lenders. It’s important to check that a basic loan won’t limit your ability to make extra repayments and pay off your home loan sooner.

Offset Account

You may be able to reduce your repayments by using some of your savings to set up an offset account. This involves linking a transaction or savings account to your home loan, with the positive balance offsetting the outstanding loan balance.

For example, if you have a linked offset account with $20,000 and a loan amount of $350,000, instead of receiving interest on your savings, your monthly interest repayment will be calculated on a loan balance of $330,000.

Package Loan

A package loan bundles a range of financial products and services together as one loan.

A package loan can offer a discount on the interest rate for the life of your loan and may come with an annual fee. However, if the fee waiver or rate discount outweighs the cost of the package fee, you may want to consider a package loan.

Line Of Credit

A line of credit is an easy way to tap into the equity in your home. Unlike a traditional mortgage, it doesn’t provide you with a lump sum payment. Instead, you can use your line of credit up to your approved limit. It gives you freedom to withdraw the money when you need it — for home improvements, investing or even a holiday. Think of it like borrowing on a credit card with your home as security. You only pay interest on the funds you actually use; at some point, however, you’ll need to repay the principal amount too.

Interest-only Refinance

Interest-only home loans are a type of loan in which the interest payments are made while no principal payments are made.

However, you should be aware that at the end of the interest-only period you will need to start paying off both the principal and interest.

Split Interest Rate

If you want the stability of a fixed-rate loan with the option of benefiting from lower rates in the future, you might consider refinancing to a split loan. With this type of financing, part of your loan is fixed for a period of time, while the rest of the balance is charged at a variable rate.

The advantage of this loan is that you’ll know what you’ll pay for the fixed portion. If interest rates go down on the variable portion of your loan, you will benefit from that too.

Compare Refinancing Rates

When considering refinancing, it makes sense to consider rates with your current lender as well as the wider home loan market. If you have a home loan interest rate that starts with a 4 or higher, it may be the right time to shop around.

When refinancing your mortgage, there are a number of factors to consider. Depending on your circumstances, you may receive different interest rates. Interest only or principal and interest repayments are two common options when re-mortgaging and the right home loan rate can be found with the help of your My LMI Group broker.

Look Beyond A Low Interest Rate

When considering a home loan, it’s important to remember that there’s more at stake than just the interest rate. When refinancing, consider what you’re trying to achieve by taking out a new loan. Do you want to pay less? Add or remove features? Consolidate debt? Or maybe you want to unlock some home equity? Remembering this when comparing loans could help you decide which option is right for you.

A My LMI Group broker will help you find the loan that best meets your needs by comparing thousands of loans from our panel of over 20^ leading lenders.

Low-doc Loans

Self-employed individuals or those without all the necessary income documents sometimes turn to low-doc loans as a solution. These loans typically have higher interest rates than standard loans.

It is possible to refinance a mortgage as a self-employed individual. Speak to your My LMI Group broker about alternate loan options that could be available to you.

Fast Refinance

FastRefi is a refinance process that allows for quick refinancing when an in-person property valuation is not required. The process can be done in less than two weeks because the new lender agrees to take on the debt before the title of the property is transferred.