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Refinance and Refinancing Home Loans

5 Things To Consider When Refinancing Your Home

With the current changes in interest rates and market conditions, the home loan given to you yesterday may not be the most suitable fit for you today. That is the primary reason why you have to consider refinancing your home. Refinancing your home allows you to get a better interest term and rate compared to the previous.

What is a home refinance?

Ever got yourself in a circumstance where you need to replace your current home with a new mortgage? Well, home refinancing is precisely that – getting a new mortgage loan to replace the existing home loan.

Refinancing your home is advantageous because it can reduce your monthly home payment amount, you can access finances for your mortgage improvement as well as cancelling home insurance premiums.

Before having a look at the five things to consider when refinancing your home, let’s check out the pros and cons of home refinancing.

Pros of Home Refinancing

The following are the benefits you will encounter when you refinance your mortgage:

Reduce Monthly Repayment

You might reduce your mortgage monthly repayment amount and end up with more money in your wallet if you manage to negotiate a better rate with your current lender. You will achieve this if you also succeed in setting a lower interest rate compared to the previous one with your new lender.

Debt Consolidation

You can use your mortgage equity to consolidate your debts. It is good because you will find yourself reducing interest rates on your debts. You can roll all your debts and loans into your newly refinanced mortgage loan. With this in place, you will only worry about paying one monthly payment often at a low-interest rate.

Greater flexibility

There are many more benefits you will receive when refinancing like receiving greater flexibility in terms of changing the duration of your loan and switching to the fixed or variable interest rate.

Drawbacks of home refinance

It is rare to find a product without its side effects. As much as refinancing can save you money, it can also land you in hot water. While lower interest rates and reduced monthly payments might lure you at first glance, it vital to also know the potential risks that might come along. Home refinancing can cause you the following problems;

Extend a Loan’s Term

Even when interest rates drop drastically, it is not always the right choice to refinance your home. Refinancing your home will typically increase the amount of time you will take to repay your mortgage loan.

Take, for example, getting a new five-year loan to replace an existing five-year loan; loan payments will be calculated to last for the next five years. If your current mortgage loan has one year left, refinancing may result in higher interest costs.

Closing Costs

It costs money to end a contract of a professional football player in the famous English Premier League. The same applies to refinance a home. You will pay a particular fee to your new lender as compensation. Extra costs may be incurred to obtain legal documents, appraisals, credit checks, among others. You might be forced to repay your mortgage insurance even if you paid for the previous home.

Consider the following

Well, for you to avoid any risks when refinancing your home, you need to consider the following:

Know Your Home Equity

Your property’s equity is the first thing you should evaluate before you make a home refinance. It is the first qualification you will need to refinance your home. Your home refinancing application will have high chances of being approved if your property equity is high. You might owe more in your home than it is currently worth or you might have no equity in it. It will all depend on your financial condition or hosing market.

Know Your Credit Score

Checking your credit score is important. If your credit file is filled with defaults, court judgements or credit enquiries, it will make it a lot harder to secure a loan with a traditional bank. Traditional lenders have become stricter on lending criteria. Alternative Lending Centres, can be more flexible; but you will still need to be aware of your score.

Your Debt to Income Ratio

Some people assume that they can get a refinance if they qualified for a home loan. It is not always the case because lenders have not confided themselves to credit scores only. They have raised the bars and become stricter with Debt to Income Ratio.

While it might seem challenging to get home to refinance, your most recent debt-to-income ratio might calm down your prospects. Always strive to keep your arrears to the minimum

The Cost Of Refinancing

Every good deed comes with a cost. The same applies to mortgage refinancing. You should always find out and get to know any expenses that are attached to your new loan. It will cost you 3% -5% of the overall refinance amount to refinance a home.

There are fees which can be reduced or at times paid by the lender. These fees might affect your principal or interest rate.

Know Your Taxes

Some of you rely on mortgage interest deduction to lower your state revenue tax bill. A home refinance may reduce your tax deduction if you refinance and start paying less interest.

It is advisable to visit a tax advisor who is experienced with home loans to provide you with valid information before you decide to apply for a home refinance.

Bottom Line

Refinancing your home is not as easy as it might seem. You need to take time to think and plan about it. You don’t want to fall on a hot frying pan afterwards. Before you go for a refinance, it will be wise if you reach out to the Australian Lending Centre for remarkable advice. They will help you figure out whether you should or should not refinance.

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Mortgage Business Loans Renovation Loans

How to Get an Affordable Second Mortgage

By getting an affordable second mortgage on your property, you are not only increasing your borrowing power — but you can use the extra money for your other needs. If you planning to increase your overall borrowings, but you have an existing mortgage, the easiest approach is to refinance it for a higher amount. One of the most important considerations in getting a second mortgage is reducing your balances by up to 50 per cent! You may ask, “How is it even possible?”

The truth is that a lot of people incur interests due to unpaid mortgages which build up over the years. In doing so, they are not only reducing their home equity, but they are also putting their homes at risk of foreclosure. So, if you can successfully negotiate your balance reductions and avoid foreclosure of your property at the same time, grab that chance. It does not only help you save money and at the same time avoid legal actions that may damage your credit status.

Here are tips to help you get the most practical and most affordable second mortgage possible:

Research is key to an affordable second mortgage

You can search for public forums and blogs that talk about the best second mortgage options available for someone with the same situation as yours. It will help you filter debt settlement companies that are willing to work on your case for a fee. By doing your research, you will understand the importance of negotiating for balance reduction, the expenses you have to pay in the process and the available options for you in your area. Just make sure that you know how to filter objective from subjective advice. Otherwise, you may immediately take up an expensive service when there are less expensive ways of solving your mortgage problems.

Weigh the Pros and Cons of Second Mortgages

In reality, it only makes sense to get a second mortgage when you don’t have ready access to funds but want to pay for your mortgages and other high-interest debts. It is also a practical and low-cost alternative for those who want to start a business. Some people who are in serious debt also use second mortgages to consolidate debts. Before applying for an additional mortgage, ask yourself if it is possible to meet your financial need without getting another debt. Or, if the proceeds of the extra money you will get are worth the interests you have to pay for a long period of time.

Choose the right lender

Some mortgage applications take a lot of time. If you don’t want a very time-consuming process, like those in banks which discourage low-income applicants with low credit scores to apply by implementing very difficult qualifying criteria, go for alternative lenders like Australian Lending Centre. The company implements fast approval process because it often handles second mortgage applications and there are no errors and delays involved because the staffs are skilled and experienced in this type of loan. The fees are affordable and manageable as well.

After that, use the proceeds of your second mortgage top pay for your urgent needs. That means you need to learn to prioritise your needs-and spend only on those that would improve your financial situation. For example, if you still have a car which is up and running and you have a huge debt to pay, perhaps it would be wiser to pay off those debts before you buy your dream car.

Thoughts for Consideration on an affordable second mortgage

It is not easy to bring yourself to do all those things mentioned above. Almost everyone knows how difficult it is to get an affordable second mortgage especially if you have a poor credit rating. On top of it all, you may have developed financial habits that diminish your income and your financial strength. But, over time, with practice, you can break habits that you may have been practising for many years.

The pull to take advantage of a second mortgage that offers ‘high equity’ at the expense of high interest may lurk everywhere you turn. There are many loan sharks offering ‘quick approval’ second mortgage online. The ads may show people enjoying a dream vacation, staying in a lavish home or probably spending for a grand wedding despite their bad credit. But the truth is that, when you have a bad credit—you should be careful with whatever money that comes your way.

Remember that getting into debt is a financial decision with a huge emotional impact. There could be many personal and emotional hurdles that can get in the way of making the best financial decision. That’s why it is important to educate yourself about mortgages and how you can use them wisely to avoid self-blame and guilt when things don’t go as planned.

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Home Loans

What Happens When You Default On Home Equity Loans?

If the value of your home, or the amount you paid for it, is higher than your first mortgage or the principal, it means that you have equity in your home. You can tap into your equity by applying for a loan, secured by it. These can be a great option to acquire finance, but what happens if you default on home equity loans?

Here are the consequences if you default on home equity loans

1.The account will be sold to a collection company.

Unlike what other people think, foreclosure is usually not the course of action home lenders choose to recover the amount you owe. When you default on your debt, your lender may sell it to a collection company who will take it from there. They will call you, send collectors to your door steps or send demand letters to attempt to recover your outstanding balance.

standard-lawsuit2. Standard lawsuit

If the second mortgage holder decides not to foreclose, can it still recover the money it has lent you? Yes. In an attempt to recover payments, the lender may file a standard suit against you. It is less scary than a foreclosure where you will lose ownership of your home, but it can seriously hurt your credit score.

3. Foreclosure

In case of default, the holder of your second mortgage may initiate a foreclosure to recover the money it lent to you the moment your house is sold at a foreclosure sale. Since mortgage is a senior lien which takes priority over a home equity like a second mortgage (because the loan was registered earlier) the first lender gets paid first. But, what if you refinanced the loan—does it mean that the second mortgage lender becomes the first priority? It depends. Whichever lender has the certificate of title will be entitled for the payout first. If you were in the process of refinancing but it was never complete before the foreclosure on the property and you didn’t pay the previous lender out, they are not eligible for the funds. If your previous lender still holds the certificate of title, then they are the ones who need to be paid out.

avoid-consequences

Here are tips to avoid the above-mentioned consequences of not paying your home loan on time…

Don’t hide from your creditors.

They will not be so enthusiastic in working with someone who avoids their calls, ignores their letters and refuse to cooperate with their offer to help for a few months. Remember that most mortgage lenders will work with borrowers who are struggling to make payments to encourage payment. So, if you’re missing payments, contact your lender right away. Inform them about your current financial situation and express your willingness to work out a repayment plan suited to your condition. Your lender may modify the terms of your loan, lower or raise the interest rate, increase or decrease the monthly payments, depending on your situation and financial capacity. It can also be a combination of the abovementioned options to make the home loan more affordable.

Explore available options to avoid foreclosure

Are you struggling to make your second mortgage payments? If foreclosure is imminent because of default, check out some of the alternatives to foreclosure that Australian Lending Centre offers:

If you want to consolidate your debts into 1 easy-to-pay, low-rate loan with low monthly repayments, get your finances back into order with a debt consolidation loan. Learn more about home equity loans and the suitable financial solutions available for you by calling 1300 138 188 today!

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Refinance and Refinancing Self Employed

Guide: Refinancing for Self-Employed Aussies

Being self-employed means that you’re going to have to put in a little more effort into finding the right refinancing solution for you. That’s exactly why we’ve put together a self-employed refinancing guide to help you get a clearer picture of what you should pay attention to, how to choose a loan and most importantly, how to find the best option for your needs.

Self-employed borrowers encounter difficulties when they’re looking to refinance their loan. This happens because financial institutions will take a closer look at their income and are sceptical due to not knowing how their business is going to progress.

This refinancing guide will tell you how to start when you’re self-employed.

Talk to a Lender

Finding the right refinancing package relies on how much you earn. According to your income, you’ll know the amount you can borrow and the limit.

Without taking to time to assess the situation, you may end up disappointed, so start slow and talk to a lender that will be able to give you some points on how to proceed and what you should know.

Do the Math

The second part of this refinancing guide is to calculate exactly how much you’ve made in the last couple of years. Two years is usually the amount of time relevant when discussing self-employed people.

Go through your records and place all your receipts in order.

Fill the Paperwork

Get your paperwork in order by gathering financial statements, a notice of assessments and income tax returns. Unfortunately, having a successful business doesn’t get you a free pass on all of these.

Although it’s time-consuming, without the necessary papers, it would be harder to convince a lender that your business is doing well and you can afford to refinance.

Are You Really Self-Employed?

Many people confuse being self-employed with sub-contracting deals or being a contractor. Some lenders might think that as long as you work for others, you might pass as an employee, which could help you skip some steps involved in this refinancing guide.

Be Honest about Your Expenses

A new piece of equipment, a few more employees or a training course might have raised your expenses the last year. Don’t try to hide them from your lender and explain the situation. There’s always a solution, even though it may not be obvious to you just yet.

Adequate Taxable Income

Unfortunately, this is one of the hardest requirements for a self-employed person. Saying and proving that you can afford to refinance a loan are two different things.

An adequate taxable income is a sort of like your green pass when looking into refinancing. Try to get the necessary paperwork to also prove it.

This guide to refinancing for self-employed contains the significant steps that you’ll have to make to refinance your loan when you are self-employed. There are benefits and drawbacks when you work for yourself, but seek professional advice if you’re having doubts about how to proceed.

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Refinance and Refinancing

Refinancing Analysed: Pros and Cons

Refinancing can be a convenient option in many cases, regardless if you are hoping to get a better interest rate or attempting to consolidate your existing debts. However, it can prove to be pretty tricky in the long run, which is why you may want to learn everything about the refinancing pros and cons.

This option may be perfect for one borrower and a disaster to another. This is why you need to do your homework and read the points below before switching to another loan system.

When Refinancing is Beneficial

When it comes to refinancing pros and cons, there are definitely some benefits you can reap by making the switch. Here are the main ones:

  • Getting Access to Equity – You can use the equity you collected in your loan for other things such as investing, renovating, buying a new car or going on a vacation.
  • Getting a Better Rate – You can get a better interest rate by refinancing, which means that your payments will also be lower. This could, in turn, save you a lot of money.
  • Increase Your Mortgage Length – By increasing the length of your payment, you will have a smaller monthly fee. However, you may end up with a higher interest, causing you to pay more in the long run.
  • Decrease Your Mortgage Length – The same can apply in reverse if you reduce the mortgage length. Not only will you get rid of the debt sooner, but you will also pay less in interest than before.
  • Eliminate Fees – You can sometimes get out of paying certain fees by refinancing a loan. If your current loan has built-in fees for additional features that you may no longer need, a refinance may help you get rid of some of these charges.

Refinancing can be a great way to make your payments easier, but you need to be aware of all the refinancing pros and cons before proceeding.

The Drawbacks of Refinancing

Just as there are refinancing pros, there are also particular cons. When checking out refinancing pros and cons, here are the few risks that you need to keep in mind.

  • Lender’s Mortgage Insurance – Whenever you get a loan, you need to pay insurance to the lender. If you change your lender, it means that you may have to pay that insurance again, even if you already paid it before. This may undercut most of the savings you hoped to get with the refinancing.
  • Longer Loan Duration – Refinancing means that you may have to pay for longer than you originally had to. This might put a damper on your plans if you had the intention to move out.
  • Extra fees – You may be required to pay certain exit fees from your own pocket, and these aren’t exactly cheap. Plus, you may be forced to pay even more entry fees upon refinancing.

Refinancing can be a great way to save some money due to its benefits. However, depending on the circumstance, this process may get you paying more than you should have if you are not careful enough. Keep in mind all these refinancing pros and cons before deciding.

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Refinance and Refinancing Debt Consolidation Home Loans

Top Reasons for Refinancing Your Home Loan

You may have heard a lot about the mortgage term ‘refinancing’. Used effectively, refinancning your home can be a great way to consolidate debt, release home equity and get a better interest rate.

Refinancing Explained

To refinance your mortgage (or home loan) refers to the replacement of an existing home loan with a new home loan, with different terms and usually increased savings.Top Reasons People Refinance their Home LoanThe top reasons people refinance their mortgage includes:

To get a lower monthly mortgage payment – this is achieved by refinancing into a new, lower-rate home loan. It could be a fixed rate loan, a variable rate loan or a split rate loan (which is a combination of both).

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Investopedia

Refinancing Your Home To Consolidate Debt

Like the majority of Australians you could have a number of debts – generally a home loan, personal loans, and the dreaded high interest credit card balance. These multiple debts involves juggling lots of different repayments of different amounts at different times of the month.

If you refinancing your home loan you could provide an opportunity to simplify your debt. This has the potential to reduce the high interest you may be paying on all your debts. This process is called ‘debt consolidation’. Debt consolidation combines several high interest debts into a single lower rate debt, possibly your mortgage, which could reduce, or at the very least simplify, your total monthly repayments.

Do note however that debt consolidation has some negatives. A short term loan such a personal loan becomes a long term debt (your mortgage), and that can result in interest on the balance for a longer period. If you aren’t savvy, it could cost you more in the long run.

Debt consolidation can be truly cost-effective, if you commit to making additional repayments to pay off the bigger loan as quickly as possible, thus taking advantage of the lower interest rate.

Refinancing a home loan to access home equity

Your home is probably one of your most valuable assets. With optimising you home equity you can work towards building additional wealth or achieve personal goals.

You can refinance your home loan to draw cash from your home’s equity for the purpose of either debt consolidation, home renovations, investments or simply to have access to some extra cash.

To reduce or alter risk

If you currently have a variable rate home loan, but now feel as though you would benefit from fixed payments, you can refinance your home loan into a new fixed rate loan to better meet your changing needs (or vice versa: change a fixed rate to a variable).

To pay off your mortgage sooner

If you want to pay your home loan off sooner, you can build up the equity in your home quicker by refinancing into a new home loan that allows you to accelerate your repayment schedule.