Home Loan Increase

Many home loan borrowers who are considering refinancing an existing home loan to access additional funds may be better off checking with a finance broker such as Ability Finance to determine if an increase to their existing home loan may be a more economical option.

Increasing an existing home loan can help avoid additional costs which can often be encountered when completely refinancing an existing home loan.

Here is a list of commonly encountered costs that often apply when refinancing a home loan to a new bank or home loan lender;

• There is nearly always a discharge fee payable to your existing lender when a home loan is completely paid out. Typically this averages at around $300 but can range between nothing and $500 or more. The actual amount will be detailed in the copy of your current home loan documents the lender provided when your current loan was accepted.
• An application fee may apply with the new lender you are refinancing to. Although your existing lender may charge a fee for a home loan increase, the difference in cost, if any, needs to be taken into account before refinancing your home loan entirely or simply increasing your existing home loan.
• A valuation fee may be charged by your existing lender if they determine that a new valuation is needed before they increase your existing home loan. Refinancing to an entirely new bank or lender may also incur a valuation fee unless the new lender waives the valuation fee or incorporates the cost of a valuation into their application fee.
• An early repayment fee is put in place by most lenders now days and may be charged if your existing home loan is repaid in full or refinanced to a new lender within the early repayment time frame. Early repayments fees are typically applied over 3 years with most banks while many mortgage managed home loans can have an early repayment fee that is payable anytime in the first 5 years of the home loan if it is paid out or refinanced in full. Some lenders apply the fee as a fixed dollar amount, others have a sliding scale fixed dollar amount, while others charge a percentage of either the original loan amount or the current balance. Once again the actual amount will be detailed in the copy of your current home loan documents the lender provided when your current loan was accepted. Early repayment fees can also be called deferred establishment fee or DEF which is the same thing - an additional cost to you if the home loan is paid out or refinanced in full within the specified time frame. Depending on the amount of a DEF a home loan increase could be more cost effective than refinancing to a home loan with a lower interest rate.
• Mortgage Insurance could well be the most important consideration before deciding to increase your home loan or refinance your home loan to a new lender. If for example your home loan has a loan to value ratio of 80% or more and you were to refinance the entire home loan to a new lender to access additional funds the mortgage insurance will be payable on the entire loan amount. This could run into thousands of dollars for many people refinancing a home loan that is mortgage insured. On the other hand if the decision was taken to simply increase and existing home loan that is, or is to be, mortgage insured in most instances the mortgage insurance will only be payable on the amount that is to be increased, not the entire loan as would be the case if refinancing to a totally new lender. This could often reduce the mortgage insurance cost by thousands of dollars. This major saving alone could well make a simple home loan increase more viable than refinancing a home loan to a lower interest rate.

We are able to help our customers assess the pros and cons of refinancing their home loan completely or simply increasing their existing home loan if this is the more economical option.

Send your home loan increase information to a finance broker online now.