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What exactly is refinancing?

Updated: 5 days ago

Mortgage refinancing – the strategic decision to move and restructure your home loan. But why would you ever want to consider doing this? You might be coming to the end of your fixed term but you may just want to see if there is a better way to manage your loan.

Let’s use your car as an example - It is due a service so you take it into the garage. You may not think there is anything wrong with the car but the mechanic will change the oil and check to see if any tweaks can be made to prevent any future breakdowns and keep you motoring on confidently. That's what refinancing is all about – reviewing your loan and tweaking the setup to make sure the combination of fixed and floating terms is structured in a way that is working best for you, and avoids any potential breakdowns.

A pair of metal spanners

Should this be done periodically? Not necessarily but it is certainly worth a check in if you are finding yourself coming to the end of a fixed term or stressed out about your repayments. 

Can everyone consider refinancing? Well, yes, but you will need to qualify for refinancing just like you had to qualify for your original mortgage. The process should include your chosen mortgage adviser diving into the depths of your financial situation and examining everything from the rates you're shelling out to the structure of your loan, and even your lofty goals for the future. Armed with this intel, they should be able to whip up a recommendation for refinancing that could save you money in interest payments and fast-track your journey to mortgage freedom.

But hold your horses, before you dive headfirst into the refinancing waters, it's wise to weigh the costs against the benefits. After all, switching mortgage providers isn't always a straightforward process. You might encounter a few hurdles along the way, like early repayment costs, valuation costs or legal fees. It's all about doing the maths and making sure the savings outweigh the costs.

Now, why enlist the help of a broker instead of marching straight to your bank? Well, brokers have many benefits that might not be shared with your bank. For example, brokers have access to a plethora of lenders, they are not restricted to the products offered by one bank. They're here to ensure your repayments are structured in a way that trims down interest while keeping your loan repayments in check. Plus, they'll handle all the nitty-gritty with the banks, sparing you the headache of dealing with it yourself.

So there you have it, mortgage refinancing demystified. If you think you could benefit from a different repayment structure, it might be time to reach out to someone who can help. The Naked Finance team of mortgage advisers offer free, professional advice that is tailored to you and your needs. Reach out to the team today and let’s make it a financially freer tomorrow! 


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