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Home Loan Refinancing means taking out a new loan on your property and using it to pay out your current loan. This may involve moving to a new lender, or negotiating a better rate with your current lender – it really depends on who is offering the best deal and features for your needs.
Apart from potentially saving money, refinancing may allow you to use the equity in your home to pay for renovations and improvements. Generally, the more equity you have, the better, as borrowers with a low loan-to-valuation ratio (LVR) may be able to negotiate a more favourable rate than those looking to borrow 90 to 95 per cent of the value of their property.
Use our Refinancing Calculator to compare your home loan against another offer now.
Are there other ways to fund my renovations?
Refinancing isn’t the only way you can use your home loan to help cover the cost of home improvements.
Other options may include:
When you’re comparing home loans, it’s important to review any upfront and ongoing fees or costs associated with exiting your current loan and moving to a new one.
This may include fees for settlement, mortgage registration, loan establishment and service, and possibly exit fees and charges. You might also need Lenders Mortgage Insurance (LMI) if you’re borrowing more than 80 per cent of the property’s value.
In most cases, the long-term benefits of refinancing should outweigh the upfront costs. Nevertheless, it’s important to remember that while you might have negotiated a lower rate of interest, by using extra funds for your renovation you will have increased the amount that you owe the bank.