Refinancing offers investors a chance to get out of a high-interest loan and unlock equity in their current investment property. If you find yourself in a loan with unfavorable rates and terms, it may be a good idea to refinance your loan.
The good news is you can find plenty of competitive investment home loans right now. For a truly successful home loan refinance, keep these tips in mind:
Understand the Full Cost of Refinancing
When you refinance your investment loan, you could save thousands on interest. However, the process of applying for a home loan refinance can cost you. Additional fees depend on the lender you choose. Usually, borrowers need to pay application fees, valuation fees, discharge fees, break fees, settlement fees, mortgage registration fees, and exit fees. Some lenders may waive certain fees (like application fees) but charge you higher ongoing fees instead.
For instance, if you want to save on upfront and ongoing costs, consider using a broker to help with your home loan refinance. At Refinance Solutions we will review your current rate and loan setup, compare the market and come back with a range of solutions that could save you money or allow you to unlock equity on your home or investment property loan.
Shorter Loan Terms Could Save You More
Instead of restarting at 30 years, generally the default option, consider a shorter loan term when refinancing. If you’ve already been paying off your mortgage for a few years, refinancing to a new 30-year term means you’ll extend the time it takes you to be debt-free and may not save as much on interest.
Sometimes, it’s necessary to add more time to your loan term. For example, if you’re purchasing a new property, taking on a few extra years could smooth your monthly repayments and allow you to better manage your cash flow. However, generally, shorter loan terms mean more savings even if the monthly repayments are slightly higher.
Know the Equity on Your Investment Property
When you refinance your loan, you may have access to the equity of your investment property. call your broker at Refinance Solutions and we can help you quickly work out how much equity you may have. If you’re planning on using the equity of your property to purchase more real estate, it’s important to figure out exactly how much equity you have on your property. Knowing your equity can help you make informed decisions about your investment strategy and future purchases.
Compare Refinance Rates Carefully
Using comparison rates, look at the standard rates of each lender. A good way to understand the true introductory rate of a home loan is to look at the comparison rate. If a lender is offering rock-bottom rates, be wary as they may be offering honeymoon rates, where lenders lower their interest rates for a one- or two-year period before the rate reverts to the standard ongoing rate.
With these honeymoon rates, you’re guaranteed a great discount for only a year or two, but once the honeymoon period is over, you may see a significant rate increase. What once looked like an attractive loan isn’t so appealing anymore.
Don’t Be Afraid to Ask Questions
With so many different investment loan refinance options, it can get confusing and overwhelming, especially for those less experienced. If you’re unsure about something, it’s best to speak to a lending specialist at Refinance Solutions. We can provide you with personalised advice and help you navigate the complexities of refinancing your investment property.
