Understanding Mortgage Refinancing for Self-Employed Borrowers
Mortgage refinancing involves switching your current home loan to a new one, often with different terms or from a different lender. For self-employed borrowers across Victoria, refinancing can open doors to significant financial advantages that might not have been available when you first secured your loan.
As your financial situation evolves and market conditions change, your original loan may no longer serve your current needs. Refinancing allows you to reassess your position and potentially access loan options from banks and lenders across Australia that could improve your financial outcomes.
Key Benefits of Mortgage Refinancing
Accessing Lower Interest Rates
One of the primary motivations for refinancing is accessing a lower interest rate. Even a small reduction in your rate can result in substantial savings over the life of your loan. This is particularly relevant if your fixed rate period ending coincided with higher market rates, or if you've been on a variable interest rate that's no longer competitive.
Releasing Equity in Your Property
As property values increase and you pay down your principal, you build equity in your home. Refinancing can help you release equity to buy the next property, fund business expansion, or address other financial goals. For self-employed borrowers, this equity release can provide crucial capital for business growth or investment opportunities.
Debt Consolidation
Refinancing enables you to consolidate debts by rolling other high-interest debts into your mortgage. This strategy can help reduce loan repayments by combining multiple payments into one, often at a lower interest rate than credit cards or personal loans.
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Refinancing Options for Different Situations
Change Your Loan Term
Refinancing allows you to change your loan term to suit your current circumstances. Extending the term can reduce monthly repayments, whilst shortening it can help you pay off your mortgage sooner and save on total interest costs.
Switch Between Rate Types
You might choose to move from a variable interest rate to a fixed interest rate for payment certainty, or vice versa to take advantage of potential rate decreases. Many borrowers also opt for split loans that combine both rate types.
Access Enhanced Features
Newer loan products often come with enhanced features such as offset accounts, redraw facilities, or more flexible repayment options that weren't available with your original loan.
The Application Process for Self-Employed Borrowers
The refinancing application process for self-employed borrowers typically requires more documentation than standard employment situations. Lenders will generally request:
• Recent tax returns and notices of assessment
• Bank statements covering several months
• Business Activity Statements (BAS)
• Accountant-prepared financial statements
• Evidence of business registration and ABN
Working with experienced professionals can help streamline application process requirements and ensure you present your financial situation in the most favourable light to potential lenders.
When to Consider Refinancing
Several scenarios make refinancing particularly attractive:
Market Rate Changes
When refinance interest rates drop significantly below your current rate, the potential savings may justify the switching costs.
Improved Financial Position
If your business income has grown or become more stable, you might qualify for loan amount increases or access to lenders who previously wouldn't consider your application.
Fixed Rate Expiry
When your fixed rate period is ending, it's an ideal time to review your options rather than automatically reverting to your lender's standard variable rate.
Conducting a Home Loan Health Check
Regularly conducting a home loan health check helps you stay informed about your loan's performance relative to current market offerings. This review process can identify opportunities to access better loan options or potentially access a better interest rate.
During a health check, consider:
• Your current interest rate versus market rates
• Available loan features and whether you're utilising them
• Your loan-to-value ratio and equity position
• Whether your loan structure still aligns with your financial goals
Making Informed Decisions
Before proceeding with refinancing, it's important to check eligibility for special lender policies that might benefit your specific situation. Some lenders offer preferential terms for certain professions or business types, whilst others specialise in self-employed lending.
Calculate the total costs involved, including exit fees from your current lender, application fees for the new loan, and any ongoing fee differences. These costs need to be weighed against the potential benefits to ensure refinancing makes financial sense.
Refinancing can provide significant advantages for self-employed borrowers in Victoria, from reducing repayments to unlocking property equity for future investments. The key is understanding your options and working with professionals who can help you access the full range of available solutions.
Call one of our team or book an appointment at a time that works for you to discuss your refinancing options.
