Key Takeaways
- Refinancing your mortgage can provide access to better rates, terms and features.
- Choosing the right refinance lender is one of the most important factors to get the best out of your refinance.
- Shopping around and exploring your options is crucial to finding the best lender for your situation and specific needs.
- Key factors to consider include interest rates, fees, loan terms, customer service, speed of service, and lender policy niches.
Refinancing your mortgage can be a smart financial move depending on your situation, but you can maximise its benefits when you choose the right lender. This guide will walk you through the key considerations for choosing the ideal refinance lender.
Banks vs. Non-bank Refinance Lenders
Lenders in Australia can either be banks or non-bank institutions. Both can provide you with your refinancing needs, but in general, they do have key differences:
Banks
- These include the “big four” Australian banks (ANZ, Commonwealth Bank, National Australia Bank, and Westpac) along with other domestic banks
- Banks are well-known brands and can offer some of the most competitive rates
Non-Bank Lenders
- These are lenders that don’t fall under the bank category and can include credit unions and others.
- They often have specific policy niches that seek to exploit the customers that cannot qualify with a bank.
- Some lenders may specialise in specific loan types and industries
- Rates can vary and may be slightly lower or higher than banks depending on the type of borrower their policy targets.
How to Compare and Choose Lenders
Interest Rates and Fees
One of the primary motivations for taking out a mortgage refinance loan is to secure a lower interest rate. Even a 1-2% difference in rates can translate to massive savings over the life of your loan. To find the best rates, compare what different lenders offer.
Loan Terms
Look at the length of the loan terms offered. Longer terms might reduce your monthly payments but increase the total interest paid over the life of the loan. Conversely, shorter terms will increase monthly payments but decrease total interest costs.
Repayment Flexibility
Some lenders offer more flexibility in repayment options than others. This can include more frequent payments, or the option to make lump sum payments without penalties.
Speed of Funding
If you need quick access to funds, consider how long each lender typically takes to process and fund loans. Some lenders might offer faster processing times than others whose service levels have blown out because of an increase in workload — a mortgage broker can assist you with determining which lenders can turnaround loans in the time you need.
Eligibility Requirements
Ensure that you meet the lender’s eligibility criteria. Lender policy will typically relate to the security property and its location, your income, credit score and capacity to make repayments when considering your living expenses and any other existing credit obligations.
Tips for Choosing the Right Refinance Lender
Start by clearly defining why you are refinancing.
- Is it for lower interest rates, better loan terms, or to better manage your finances? Your goals will significantly influence the type of lender and loan terms that are best for you.
Don’t settle for the first lender you come across.
- Explore a variety of lenders, including traditional banks and non-bank lenders. Each type of lender offers different advantages and disadvantages depending on their loan products, processing speed, and customer service.
Look at multiple aspects of the loan offers, not just the interest rates.
- Consider the comparison rate to get a complete picture of the loan’s cost. Also, compare loan terms, repayment options, and any penalties.
Understand what each lender requires.
- Lenders policy related to income, employment and other areas can vary significantly. Knowing these can save you time by applying only to lenders whose criteria you meet.
Evaluate any additional benefits.
- Some lenders might offer additional perks such as discounted fees for existing customers, financial planning services, or easier terms on future loans. These benefits can add significant value beyond the immediate terms of the refinance.
Seek professional advice.
- Don’t hesitate to consult with financial advisors or loan experts. They can provide valuable advice based on your financial situation and help you make a more informed decision.
Get Your Refinance Right by Choosing Wisely
There are plenty of lenders in Australia, but not all will be a perfect fit for you. By carefully evaluating factors like interest rates, fees, loan features and lender specialties, you can find the right lender to refinance with, saving potentially thousands over the life of your loan.
Need help finding the right lender? Reach out to us and we’ll help match you with the right one for your home mortgage refinance.
