Refinancing

There are many reasons to refinance – a job change influencing your financial situation, a current lender’s loan rate that isn’t keeping pace with the competitors, you want to obtain even more real estate or perhaps need to renovate what you already have.

Another reason to refinance your home loan might be to consolidate your debts and only have one monthly repayment. If you have multiple debts from various sources or institutions such as a home loan, personal loan, credit card or other high interest loans, and you’re having trouble paying these off, then it could make sense to roll these debts together with your home loan. The main advantage here is that your home loan rate is typically a lower rate.

Some borrowers also want to refinance to use the equity in their home to pay for home improvements or other reasons. Keep in mind, while allowing you to expand your property portfolio or value, it will also greatly increase the loan term.

Qualifying for a loan

The general lending criteria are:

  • You should have 5% – 10% in ‘genuine’ savings (genuine savings is defined differently by lenders but typically is defined as the funds that an applicant has saved themselves gradually over time. Generally speaking, lenders require at least 5% of savings in the applicant’s account over a three-month period prior to application.
  • A good credit history.
  • A healthy credit score.
  • Stable employment.

Expenses

Your living expenses and existing credit make a significant difference in how much you can borrow. You may need to reduce your discretionary spending in order to maximise how much you can borrow.

Rental income

Most banks use 80% of rental income while some will use 100%

Other income

Banks assess PAYG salaries in the same way but apply different percentages for other types of income, including dividends, distributions, bonuses, self-employed add backs, overtime etc

Negative gearing

Only some lenders will take the negative gearing benefit into account which can add a significant amount of additional borrowing.

Assessment rates

In 2019, APRA changed the way banks needed to assess a borrower’s capacity to repay a loan. Lenders use different assessment rates and therefore off the same income, will lend different amounts.

Based on the above you will have noted that there are numerous items to consider and we highly recommend calling us to discuss your particular circumstances.

Charter Finance

Find out if you qualify

Get in touch with Charter Finance today and let us chart this journey with you!