Homeowners often choose to refinance to benefit from low interest rates or to reduce their monthly payments. Homeowners who wish to refinance apply for a new loan to pay off their existing mortgage and replace it with a new lending arrangement. Refinancing can impact your finances in the short and long run.
There are several reasons to refinance your mortgage; your aim is to decrease your monthly bill, pay less in mortgage interest, and reduce your monthly payment, but they all usually come down to the one key thing: SAVE MONEY.
What are the reasons people refinance?
People refinance for various reasons, which may include the below:
- Refinance for better interest rates and cash back with the new bank.
- Refinance to consolidate more expensive debt into the home loan.
- Refinance to improve the terms of the lending, e.g. extension of interest only terms.
- Refinance to fund purchase of a business, where the other bank is more receptive to the proposal.
- Refinance to fund purchase of a rental property, where the other bank is more receptive to the proposal.
- Some property investors like to spread their properties portfolio with different banks and may refinance part of their lending to other banks.
- Refinancing also could be a good opportunity for customers to restructure their lending as per their current needs and objectives.
Read Also – How Does Equity Work When Buying a Second Home?
What are the benefits of refinancing?
- Competitive interest rates, together with a generous cash back by the new bank.
- You may potentially save thousands of dollars by refinancing and consolidating your more expensive debt.
- Opportunity to better structure the lending as per current needs and objectives.
- Different banks have different lending criteria, and their offered terms could be different. It may be prudent to Refinance Loan to a bank which offered the best loan terms.
- It may help you achieve your goals of investing in rental properties.
- It may help you being able to purchase the business that you’re looking to buy
Am I eligible for a refinance on my loan?
If you have the minimum required equity and have income to establish your servicing ability, you may be able to refinance your loan to another lender. However, it requires an analysis of whether the proposed refinance helps you in your situation or not. Your bank or a Mortgage Advisor Auckland can help you with this.
How much money can I get when I refinance?
It will depend upon your particular situation, which among other things will include how much equity you have and will depend upon the level of your income. The mortgage advisor can give you an indication of your borrowing capacity before submitting the application to a bank.
Will I receive a lower interest rate on my refinanced loan?
The mortgage advisors like Kiwi Mortgages can assist you with comparison of the offerings from different lenders and if required can refinance your home loan to the lender best suited to your particular situation and needs. You will most likely get the most competitive interest rates upon refinance.
What do I need to qualify for a refinance?
As a minimum, it will include:
- Purpose – the proposed refinance should benefit you in your situation.
- Equity in your properties.
- Income enough to service the loan.
- A good acceptable credit history.
- A good acceptable account conduct.
How will this refinance affect my monthly payment?
If you aim to achieve lower home loan repayments, your Mortgage Advisor might advise you to refinance to another lender to lower your loan repayments by extending the loan term or by debt consolidation.
Is it a good time to refinance now?
You should keep reviewing your lending portfolio periodically and refinancing your loans to another lender is not the only option that you consider in your review. However, if your situation so demands your mortgage advisor will assist you with Refinance Mortgage your loan to another lender.
How much will a refinance save?
Subject to your individual situation you may save thousands of dollars by refinancing to a lower interest rate and also from the cash back that the banks are currently offering for new lending.
What is the impact of refinancing on my credit score?
Each time you go to a lender they will likely refer to your credit file. If there are too many inquiries on your credit file, your credit score may potentially go down. However, one or two inquiries for Refinancing of your Home Loan, especially if it helps you achieve your wider objectives, will not impact your credit score much. Your credit score will be low if there are too many inquiries over a short period of time.
What are the costs of refinancing? Is there any fee required when refinancing?
There is no fee as such but there could be cost associated with refinance, which may include your lawyers fee, break fee if any, valuation cost if required. However, if the proposed refinance helps in your situation, then the cash back that you’re likely to receive from the new bank may more than cover these costs. Speak to your Mortgage Adviser.
What are the documents needed to refinance?
It depends upon your individual situation but generally will include the below as a minimum:
- Your identification documents, such as passport, driver license.
- Your income related documents, e.g. pay-slips or financial accounts for your business or IRD returns etc.
- Statements for your bank accounts, including home loans.
- Statements for your other loan accounts, if any.
- Copy of the latest trust deed with variations, if applicable.
- Rental agreements for all rental properties, if applicable.
How does equity work in refinancing? How much equity is required to refinance?
The banks normally require 20% equity for owner-occupied properties and 30% for rentals. However, in some cases, the banks may consider Refinancing on Lower Equity, for example, if no additional funds are sought. Speak to your mortgage advisor.
Do you need to get a new property valuation done when you refinance?
Not normally but if no online valuations are available for some reason, the banks may require a registered valuation completed.
How long does refinancing take?
Once your loan application has been approved, you may potentially refinance within seven to 10 days.
Can I consolidate other debts into this loan?
Yes, you can if it benefits you in your objectives.
Are down payments required to refinance?
Generally speaking there are no down payments required for refinancing but in certain situations, it may be prudent to reduce your lending in order to bring it to a certain level of loan to value ratio, which may potentially help you to get lower interest rates. Talk to your Mortgage Adviser who will assist you with this calculation.
Should I consult a mortgage broker for refinancing?
You should definitely keep reviewing your lending periodically as your situation changes. Mortgage Broker Auckland can add a lot of value in such reviews and we encourage you to speak to your mortgage advisor.
How do I apply for a refinance on my loan? How do Kiwi Mortgages help in refinance?
Kiwi Mortgages will assist you with analysing your situation to determine if the financing will be a good option in your situation. We will be happy to answer all your questions in this regard.
We will then take an application from you together with the required paperwork, which typically includes your income evidence and your bank statements, among a few other documents.
We will then put together your application and apply with the bank to Secure a Refinance Approval for you. Once the approval is at hand, we will assist you with the approval conditions if any, in finalising your lending structure, securing competitive interest rates & cashback and completing the refinance settlement.
We will assist you with the entire process from the initial application to a stage where the refinance is completed. Kiwi Mortgages continues to assist you with your subsequent lending requirements just when you need them.