What You Should Know Before Switching Lenders for Refinancing

Refinancing your loan is a good choice if your repayment capacity and needs have changed over the period or if you want to maximize the repayment benefits introduced in new home loan products. You can save thousands of dollars across the loan repayment period by switching lenders to refinancing the existing home loan to a new loan available with better features. However, switching lenders is a complex task that requires lots of considerations spanning across different aspects. A wrong decision about switching lenders for loan refinancing may not be as beneficial as you expect or even may cost you more. This blog may help you know all that you should essentially know before switching lenders to refinance your existing loan.?

What Does It Mean Switching Lenders for Loan Refinancing?

Refinancing a loan means replacing an existing loan with a new loan offering better terms enhancing your repayment comfort and reducing total costs. Switching lenders for loan refinancing involves the transfer of your loan to a new lender offering better loan features, interest rates, and customer service.?

When Should You Switch Lenders for Loan Refinancing In Australia?

You should consider loan refinancing switching lenders if interest rates have dropped, you have at least 20% equity in your property, the current lender isn't offering competitive rates to benefit you, or if you've improved your credit score making you eligible for a better loan product.

What You Should Know for Successful Lenders Switching for loan refinancing?

Home loans are one of the biggest financial commitments most Aussies ever make. As life changes, your financial status also changes. That’s why it makes sense to check whether your existing home loan plans is still working well for you or if you should consider refinancing it. If you're planning to switch loans, you're probably focused on getting a better interest rate to save more. But there are many other things also you should know before deciding to switch lenders for refinancing-

1. Income & Expenses: Evaluate your current earnings and expenses considering any future changes to your income or expenses that could affect your repayment capacity.
2. Future Financial Goals: Assess your long-term financial goals like saving for retirement, funding children’s education, or significant investments. Explore the refinancing options that align with your goals and help you achieve them.
3. Impact of Credit Score on Refinancing Terms: Your credit score changes with time; an improved credit score makes you eligible to get reduced interest rates and better terms while refinancing loans. Therefore, it’s crucial to check your current credit score and improve it before refinancing the existing loan.
4. Loan-to-Value Ratio (LVR): The Loan-to-Value Ratio (LVR) is the percentage of your property’s value that you owe on your home loan. Lenders prefer an LVR of 80% or lower to minimize their risk. If your LVR is higher than 80%, you will have to pay Lenders Mortgage Insurance (LMI) also which can increase the cost of loan refinancing.?
5. Fixed Rate and Period of Loan: If you have a current loan at a particular interest rate for a fixed period, check when the fixed period ends. Refinancing before the end of the fixed period may incur break fees increasing the cost of loan switching.
6. Repayment Options: Check whether your current loan scheme allows you to make extra repayments or switch between different repayment frequencies. Flexible repayment options help you manage your mortgage loan more effectively reducing the interest costs over time.
7. Loan Features: Assess the features of the current loan. Some features provide additional flexibility to save money during the repayment period. When comparing loan switching options, ensure that the new loan offers better features.?
8. Eligibility for loan refinancing: Are you eligible for loan refinancing? Different mortgage lenders have different criteria to refinance a loan, but you’ll need to meet the following criteria essentially-?

• You should be a permanent adult Australian resident?
• You should have more than 20% equity in your property?
• You should have income proof
• You should have improved your credit score?

1. The Cost of Loan Refinancing: Different lenders refinance loans at different costs. It is better to explore the upfront costs of loan refinancing.??
2. Potential Savings: You can use a mortgage refinancing calculator to know how much you could save by refinancing after paying fees and costs. Make sure that the savings outweigh the refinancing expenses involved in lender switching.
3. Can You Access Home Equity?: You should make sure whether the selected refinancing scheme allows you to use home equity or not. Only a few refinancing schemes at new lenders allow new borrowers to use home equity to get extra funds to meet their financial needs.??????
4. Can You Consolidate Other Debt?: You should make sure whether the selected refinancing scheme allows you to consolidate other debts also with the new refinanced loan providing cost benefits.?
5. Will You Need A Deposit Again To Refinancing Mortgage Loan?: If your equity value is less than 20% of the property value, lenders may ask you to pay Lenders Mortgage Insurance (LMI).???
6. Is It the Right Time to Switch Lenders for Loan Refinancing? Different mortgage loan refinancers follow different processes; therefore, the time for completing the entire loan refinancing process is different. Know the refinancing processes of different lenders to choose the most appealing.????
7. Loan Refinancing Benefits: Switching to a cheaper loan is the major reason for refinancing. Low interest rates are the top concerns of borrowers. Ask the lender if there is any new loan product to serve your interest. The key benefits of switching lenders for refinancing you should make sure before signing the deal are reduced payments, shortened mortgage duration, freedom to switch between fixed and variable interest rates, mortgage protection insurance, etc.?????
8. Customer Service: The quality of customer support and service matters a lot in your satisfaction. You should confirm the quality standards of customer support of shortlisted lenders. Reviews and star ranking on social media platforms may help you judge the customer support standard.?
9. Know Your Lender: When you decide to switch your mortgage loan to another lender, it’s crucial to compare lenders thoroughly. Some mortgage brokers work with a limited panel of lenders, so you might not get all the suitable options. The major comparison parameters that you can use are experience in a particular service, diversity in loan products, transparency, scope of service, social repute, etc. You can choose a lender through online comparisons, direct contact, or mortgage brokers.

After more than a year of the Reserve Bank of Australia (RBA) holding the cash rate, interest rates are expected to drop in 2025. At least two rate cuts have been predicted this year, therefore, many homeowners are considering refinancing their mortgage loans to save more and secure better loan terms. Major banks predict a cash rate drop to as low as 3.1%; this means lower monthly repayments for existing borrowers and improved affordability for real estate investors. The Australian Prudential Regulation Authority (APRA) may introduce a lower mortgage serviceability buffer in 2025 allowing Australians to borrow more. Still, there are many varying factors and new developments to take place affecting refinancing decisions. Need professional help for seamless refinancing?

ASK Financials is a trustworthy mortgage broker with expertise in helping homeowners and investors refinance their mortgage loans. The refinancing experts offer maximum options for switching lenders. To switch lenders for easy refinancing, you can book your free chat or call 0433 944 055.