Tag: refinancing self-employed

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Refinance and Refinancing

The benefits of refinance

the benefits of refinance

Most people lock themselves into a loan and chip away at it slowly over the years, without looking into their options and re-evaluating things down the track. The truth is, refinance comes with many benefits and is definitely something you should be considering.

What does Refinancing Mean?

Refinancing occurs when you revise your interest rate, payment schedule, and terms on a loan. It is often best to consider refinancing your loan if substantial changes occur with interest rates, as it could end up saving you lots of money in the process. You write up a new agreement with the new terms set under it.

Different Types of Refinance

In general, refinancing applies to mortgage loans, car loans, and student loans. There are different ways you can refinance a loan:

Rate and Term Refinancing

This is the most common type of refinancing, where the original loan is replaced with a new loan that has lower interest payments.

Cash-out Refinancing

These are used for loans where something has been put up as collateral, for example, your house. If that increases in value, you can withdraw the value for a higher loan amount.

Cash-In Refinancing

This option allows you to pay down some of your loans for smaller loan payments.

Consolidation Refinancing

If you have lots of different loans in action, this type of refinancing enables you to take out a loan that is lower than your current interest rate across all loans.

Benefits of Refinancing Your Loan

Refinancing your loan comes with many benefits, and these can vary from lender to lender. Here’s a guide to some of the benefits you can expect from a refinance.

A better rate

Unsurprisingly, this is one of the most common reasons people refinance loans. Interest rates may have gone down, or your credit may have improved. This could mean you are eligible for a better rate than you are currently paying.

Lower payments

 One of the benefits that come with a lower interest rate is that your monthly payments are also reduced. You also have the option of extending your pay off date. By taking longer to pay your loan back, you will also have less to pay each month.

Lock-in contracts

If you are currently on an adjustable-rate for your loan, you can choose to refinance into a fixed-rate for the remainder of the loan. This has the benefit of letting you lock in a good interest rate, and you can also plan out your payments.

Shorten your loan

mortgages, in particular, are long-term loans that span across decades. You may start off with a 20-year loan and then refinance when you are in a better position to make it a 10-year loan and pay off faster. The rates on a shorter loan are also much lower, so you will end up paying less.

Cash-out

The cash-out refinancing discussed above provides you with access to money when you need it. You can borrow against the amount your equity has risen and have access to that cash immediately. Mortgages tend to have lower interest rates than other loan types, so this can be a great way to do it and save yourself money in the process.

Consolidate debts

You can use the money from the cash-out refinancing to pay off other debts you may have owing, so you save on interest rates. As mentioned, mortgage interest rates are generally a lot lower than other types of debt. This also means you can reduce how much you are paying off each month, as mortgages are long-term debts.

How it Works

Despite all these benefits that come with the loan refinance, it is important to think your decision through properly before going ahead. When you refinance a loan, your lender pays off the initial loan for you and then you take out a whole new loan with the new terms. There are fees involved in this process, so you want to make sure the savings are worth it at the end of it all.

You have to pay an application fee to start the process, which covers the credit check and administration costs. If your application is denied, you won’t receive a refund. Once approved, you then have to pay a loan fee, which covers the lender’s administration and financing costs.

Some of the other costs include an inspection fee, recording fees, attorneys’ fees and more. The most important thing to do before you head down this path is to add up the costs and savings and see how they balance out in the long run.

There are so many practical advantages that come with refinancing your loan, so make sure you look into it and don’t just keep paying off your loan without a thought. You could potentially save yourself plenty of money in the process and have that loan paid off even faster.

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Refinance and Refinancing Self Employed

Guide: Refinancing for Self-Employed Aussies

refinance for self employed
refinance for self employed

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

pros and cons of refinancing||Pros and Cons of Refinancing

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.