How Much Can You Borrow?
Refinancing is a great financial option as it allows borrowers a chance to reduce their interest rates with a new loan. While you could potentially save thousands of dollars in the long run, it’s important to be clear about your goals and your reasons for wanting to refinance your home loan.
Taking the time to weigh all available options will help to determine whether refinancing your mortgage is the right choice. Even after making the decision to refinance, it is strongly recommended to speak with a broker so they can go over in detail what your available options are.
Qualifying for Home Loan Refinancing
Before you start the application process, the first thing that the lender will look at when determining how much you can borrow is your income. If you are in a situation where your income is unstable or your credit history would work against you, then refinancing may not be your best option.
Your current financial commitments, loans and credit history will also largely determine the terms of your refinancing and whether you even qualify. Lenders tend to offer better rates for those with solid finances and a favorable background.
It might seem obvious but your income should be able to comfortably cover all your living expenses in addition to the monthly loan payments. If your mortgage repayments exceed more than 40% of your salary, then the lender may advise against home loan refinancing or simply not approve your application.
In other words, the stronger your financial health the better your chances of getting approved for a home loan refinance that works in your favor. Only a qualified broker will be able to tell you the exact amount you can borrow. This figure is based off a number of factors including your income and current financial responsibilities.
The Refinancing Process
The entire refinancing process is fairly straightforward and typically proceeds in the following order.
1. Your broker helps you find a loan that fits your lifestyle and the application process is started
2. Upon approval, the current lender is notified that the mortgage will be paid out.
3. The final amount is then paid off in full by the new lender upon settlement
4. Title deeds are transferred to the new lender
5. A Discharge of Mortgage document is then lodged with the Land Titles Office in your state
Before getting the process started, take an honest look at your finances. Use the loan calculator at Loan Monster to determine how much you can borrow.
* The information contained in this website should not be taken as constituting personal advice. We recommend that you seek professional assistance before acting upon any information provided or linked on this web site.