? Mortgage Brokers Not to be confused with mortgage managers, mortgage brokers are responsible for introducing borrowers to lenders - they act as an intermediary offering prospective borrowers information on various lending institutions and their products.
? Mortgage Managers Mortgage managers are lending specialists who arrange funding for home and investment loans. Unlike banks, building societies and credit unions, mortgage managers do not have a base of customer deposits with which to fund their loans instead they source their funds via a process known as securitisation. This is a process whereby assets with an income stream are pooled and converted into saleable securities.
The mortgage managers job is to set up the loan and perform a liaison role with all parties involved, namely originators, trustees, credit assessors and borrowers. They provide the customer service role and are there to manage your loan throughout its term.
? Credit Unions A credit union is a cooperative that is owned and controlled by the people who use its services. Each member is both a customer and a shareholder in the credit union.
Deposits from members are used to fund loans to other members, with the credit union business structure facilitating the process. Credit unions serve people who share a mutual interest, such as where they work, live, or go to church.
Credit unions are non profit organisations, and because there are no external shareholders there is no pressure to earn profits at the expense of customers.
Like banks, they offer a wide variety of banking facilities such as loans, deposits and financial planning. Credit unions main function is to serve members needs rather than make a profit. They therefore put a great deal of emphasis on customer service and meeting the needs of members.
? Building Societies Building societies operate in the same manner as banks and obtain their funding primarily through customer deposits. As with credit unions, customers are members. In a sense they own the society, which is why they are often referred to as mutual societies.
? Banks Australian banks are regulated by the Reserve Bank. Banks are the original lending institutions and for the most part they source their funds through customers term deposits and savings deposits via their branch networks.
Customers are paid interest on deposited funds and these funds are then available to lend to borrowers. In turn, these borrowers pay interest to the bank on the sum lent. The margin between interest paid on deposits and interest received from loans provides banks with their major source of revenue.
Refinancing a Home Loan or Mortgage basically means to take out a new loan (usually with a different bank or lender) and use these funds to pay out the old loan. Typically this is not a difficult process, with the right kind of assistance.
In a recent survey conducted by Mortgage Choice it was found that Home Loan Refinancing accounts for 34% of all the mortgage applications processed in Australia. When you think about it this is a logical step because over time borrowers needs and circumstances change, and they require their Home Loans to adapt with them.
Reasons Why Borrowers Refinance Their Home Loan
Australian Home Loan borrowers often consider refinancing for many varied reasons including:
Debt Consolidation - to reduce both the amount of interest being paid, and the repayments that are required. This also makes it simpler to manage as there is usually only one fortnightly or monthly account to pay afterwards.
Changes in personal circumstances - such as starting a family or getting a new job, or moving out of the property.
Need to access extra funds - if you need to pay for a new car, a big holiday, home renovations, an investment property, buying shares or for education expenses.
Not being happy with the current loan or lender
To change the term of the loan - the borrower may now be in a position to make extra payments and wants to utilize an accelerated payment schedule.
To reduce borrowing costs - say no more!
To switch from a variable interest loan to fixed or vice versa
To minimise tax - where the current borrowing arrangement is inappropriate
To assist in a separation or divorce
To start or purchase a business
Should You Refinance Your Home Loan?
As we have outlined above there are many reasons why Australian borrowers choose to refinance their mortgage. Mortgage Choice has developed a Refinancing Checklist to raise some issues that are not always considered. The aim of the Refinancing Checklist is to help you make an informed dicision.
WARNING! There are dangers in unnecessarily refinancing or "churning" your mortgage. Churning is a term that refers to a finance provider refinancing a borrower even when it is not beneficial to the borrower and occurs at the expense of the borrower. It is crucial that borrowers fully understand exactly why they are refinancing, and also to calculate the overall savings achieved through this process.
The Costs Associated With Refinancing
Time and some mental exertion are two of the big costs associated with refinancing, but it's pretty difficult to place a dollar figure on these two things. As far as the fees and charges which are payable when refinancing it differs from state to state in Australia, but on an average size loan ($215,000) the cost of refinancing is approximately $1,000. This cost is generally rolled into the new Home Loan so there are no "out of pocket expenses".
Some of these refinancing costs can include the following:
Discharge fees to exit the old loan.
Registration fees for the new mortgage.
Loan Stamp Duty (not applicable in Victoria, Northern Territory and A.C.T)
Account fees
Lenders Mortgage Insurance
Valuation fees
Early payment fees
The most important issue is that you know the genuine costs of refinancing, and the features and benefits of the new loan, so that you can evaluate the benefit refinancing provides.
TIP: It can pay to ask the new lender if they are prepared to contribute to these refinancing costs. If they are keen to gain new clients they may offer some help.
How To Refinance Your Home Loan
Using the services of a good Mortgage Broker can reduce the time taken to refinance, and also provide some certainty as to the end result. A competent Mortgage Broker will assess your borrowing requirements and assist in comparing your current home loan with one or more alternative offerings. When a refinance is chosen as the most suitable alternative, your Mortgage Broker will do all of the "leg work" required to arrange a suitable refinance. This is at no cost to the client, as brokers are paid for this by the lender chosen.
TIP: Always keep in mind that it is overall cost and loan suitability which are the most important factors when refinancing, not necessarily just a lower interest rate (although it does help).
Chris Smith has sinced written about articles on various topics from The Internet, Dog Beds and Eye Care. Chris Smith works with Mortgage Choice in Australia.For further information or help with your refinancing needs please visit .. Chris Smith's top article generates over 6600 views. to your Favourites.