Refinancing a home loan can help homeowners get a lower interest rate, consolidate debt, or adjust the duration of the loan term.

Over the course of a home loan, borrowers may find that their existing home loan no longer meets their financial needs or circumstances. Refinancing allows homeowners to pay off their existing home loan by replacing it with a new home loan with more favourable terms to suit their financial goals.

Refinancing provides borrowers with the opportunity to change their current loan situation. Reasons for refinancing a home loan include:

  • Switching to a lower interest rate – Refinancing an existing home loan to a new one with a lower interest rate can potentially result in cost savings over the life of the loan. However, exiting a current home loan may incur additional fees — these should be compared against the potential savings of the new loan to ensure a positive outcome.
  • Debt consolidation – Borrowers that have debts from multiple sources can benefit from consolidating them under a single, lower-interest home loan. The borrowed amount from the refinanced loan is used to pay off debts, with the new loan serving as a combined source for repayments. 
  • Adjusting loan terms – Changes in personal finances can result in a need to look for a loan with more suitable terms. Refinancing can be done to find a better loan structure to meet changing financial needs.

How To Refinance A Home Loan

  1. Determine the main goals for refinancing a home loan (lower interest rate, changes in financial ability)
  2. Gather loan options from different lenders to understand what options are available. Engaging a mortgage broker is a great option to quickly source loan options from multiple lenders.
  3. Assess the available loan options, taking into account any additional fees or costs that will apply to existing the current loan and taking on a new loan.
  4. Apply for a new loan with the chosen lender.
  5. Upon gaining approval, proceed to settle the existing loan with the borrowed amount to close it.

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