Here are the most common home refinancing definitions.

AAA Rating:

This is a security rating, in terms of how secure a company, share or bond is. A triple A rating is the most secure rating that can be achieved.

Accrued Interest:

Interest that has been calculated, since the last interest payment, and is owed but is yet to be paid.

Additional Repayments:

This is any extra payment you make on top of the minimum monthly payment are required to make to service your loan.

Adjustable Interest Rate:

A loan that has an interest rate that changes through the term of the loan. It usually varies in accordance with the official market interest rate.

Amortization:

The repayments of a loan that cover both principal and interest. These repayments are scheduled in installments over a period of time.

Application Fee:

This is the fee charged by lenders to set up and process a loan application. Paid up front, it is usually refunded if the loan is declined. Also know as establishment fee.

Appraised Value:

The estimated value of the property, however not necessarily an accurate market value of your property. This is needed by lenders, offered to them as security for your new home loan.

Arrears:

When behind on your repayments this is the total of unpaid loan repayments.

Assets:

Real estate, a car, securities, cash and other items of economic value owned by an individual or corporation.

Basis Point:

One hundredth of a percentage point (0.01%) Used to measure the rate of interest.

Break Cost:

The fee charged for switching from a fixed rate home loan to a adjustable rate home loan before the fix rate period has expired.

Bridging Finance:

A short term loan that enables you to purchase a new property whilst you await the sale of your existing property.

Capital Gain

: The profit from the sale of a property. It being profitable when the sale price is higher then the purchase price.

Capped Rate Loan:

Like an adjustable rate loan but, the interest cannot exceed a specified rate for a set period of time.

Certificate of Compliance:

A certificate that confirms Council building regulations have been followed in regards to a specific property. This can be obtained from Councils for a fee.

Certificate of Title:

A certificate issued by a government body that proves ownership of a property and details dimensions and encumbrances on it e.g. mortgages.

Community Title:

A property title establishing ownership of a club house, swimming pool and other communal dwellings to be shared among all dwellers of a particular estate.

Company Title:

A property title where a company owns the whole of the property, and by purchasing shares in the company, the purchaser gets authority to reside in a particular area of the real estate.

Compound Interest:

Interest that is added to the principal before it is next calculated. Funds earning compound interest grow at an exponential rate.

Consumer Credit Code:

A law that was passed to protects individual that are borrowing money from the lenders. It gives the individuals certain rights and make the consequences of the loan more transparent by requiring lenders to provide certain information about their loan.

Contract:

A legal agreement made between to or more parties.

Contract for sale:

A contract that lists the details and conditions of a sale/purchase.

Conveyancing:

The legal process where ownership of a property is transferred from the old owner, the seller, to the new owner, the buyer.

Covenant:

An agreement in regards to the usage or nature of property on specific lands.

Credit Bureau:

An organization that records people’s credit history and is authorized to issue credit reports, on individuals, to lenders.

Credit Limit:

The maximum amount a lender sets, on a loan, for the borrower to borrow up to.

Credit Reference or Credit Report:

This is a report detailing an individual’s credit history. Used by a lender to assess the risk of lending to people, it can only be obtained with permission and from authorized credit reporting agencies.

Daily Interest:

Interest that is calculated daily.

Debt Service Ratio (DSR):

This is a measure of ones ability to service a debt. Usually expressed as a percentage of ones income in comparison to the individuals expenses.

Default:

When you fail to make a loan repayment by a specific date.

Disbursements:

Expenditure incurred by the services of third parties in relation to finalizing your mortgage e.g. solicitor and government fee’s for title searches and registration.

Early Repayment Penalty:

This a fee charged by lenders if you pay off your home loan early. Not all lenders charge this fee.

Equity:

The amount of the property value that you own. Every bit of principal you pay from your home loan becomes your equity. Any rise in the value of your property becomes your equity. To work out how much equity you have in your property take the current market value of the property and subtract the outstanding home loan balance.

Establishment Fee:

(See Application Fee definition)

Exchange of contracts:

When the buyer and the seller exchange contracts this locks them into the stated course of action. The buyer must buy and the seller must sell. However some states allow a cooling off period after the exchange of contracts.

Exit Fee:

This is a fee charged by lenders when the borrower wishes to refinance their loan with another lender, within a specific time period from the start of the loan. Not all lenders charge this fee.

Facility:

Another name for your loan account.

Fixed Interest rate:

A home loan that has its interest rate locked to a specific rate for a set period of time. Fees may apply in relation to early repayment or switching to variable rate loan.

Garnished:

Having money diverted from your income, to another party, before you receive it.

Gearing:

The ratio of property income to repayments needed to service the loan.

Government or statutory charges:

These are charges payable by an individual that have been incurred only due to various government laws, that are in place. E.g. Stamp duty and mortgage duty. The charges vary from state to state.

Guarantee:

Where a third party promises to repay the home loan if the borrower defaults. This is a form of security for the lender.

Guarantor:

The person giving the guarantee to the financial institute.

Interest:

In reference to a loan, interest is the fee charged by a lender to a borrower for the use of borrowed money. This is usually expressed as an annual percentage of the principal; the interest rate.

Interest Only Loan:

This a loan where your minimum repayments over the term of the loan only cover the interest. You are not obliged to pay any principal until the end of the loan term, where the principal is due in full.

Joint and Several Liability:

Where a loan is taken out jointly, by two or more people, all parties are responsible for the loan and must make repayments. In joint loans if one party defaults, all parties are held responsible.

Joint Tenants:

Where two or more people own a property. In the case of death to one or more parties involved the title reverts to the remaining survivors.

Lease:

A contract that allows residence of a property for a set amount of time.

Lenders Mortgage Insurance:

This is insurance that protects the lender against the borrower defaulting. The insurance premium is usually paid by the borrower, however it does not offer them any security at all. It only gives the lender some security.

Liabilities:

A person’s financial obligations or debts.

Loan Agreement:

The contract between the borrower and the lender. This document will outline all the conditions that apply to the loan.

Loan Security Duty:

Charged by the government for the registration of a mortgage. Also know as Loan Stamp Duty or Mortgage Stamp Duty.

Loan to Valuation Ratio (LVR):

This is a comparison of your loan amount to the value of your property. It is usually expressed as a percentage. For example, if you have borrowed $90,000 and your property is valued at $100,000, the LVR would be 90%

Lump Sum Payment:

These payments are additional and serve the purpose of reducing the loan amount. (See Additional Payments)

Mortgage:

A form of security for a loan over property. The lender has the right to the property if the borrower defaults on the loan repayments.

Mortgage:

The person or institute lending you the money and taking security over the property.

Mortgagor:

The person borrowing the money and providing the property as security.

Negative Gearing:

Where the income derived from the property is less then the costs involved with obtaining and maintaining the investment. The difference can be used as a tax deduction.

Overdraft:

Where a borrower can exceeds the account balance limit, to a predetermined amount, assigned to them by the lender.

Power of attorney:

Where authorization is given to another to act as ones legal representative.

Principal:

The amount borrowed, or the amount borrowed which remains unpaid. In reference to your monthly home loan payments it is the part of the monthly payment that reduces the outstanding balance of a home loan.

Principal & Interest Loan:

A loan where the interest and the principal are repaid together through the repayments.

Private Sale:

A property sale that does not go through a real estate agent.

Redraw Facility:

A facility that come with some loans where by if you have made any lump sum payments/additional repayments you can then access and use that money.

Refinancing:

Switching lenders by finalizing your current home loan with money obtained from a new home loan. This is a home refinancing loan.

Reserve Price:

A minimum price that a seller will accept from a buyer.

Search (Title search):

A search that provides you with details of ownership and encumbrances of a specific property.

Security:

Property which is used to guarantee a loan.

Settlement:

The finalization of the process needed for a buyer to take possession of property. All documents are finalized and handed over between seller, buyer and lender.

Settlement Date:

The date at with settlement (see above) will take place.

Signatory:

The person who’s signature is on an account and grants them access to it.

Survey:

A plan of the land that details the positions of buildings and boundaries.

Tenants in common:

Similar to joint tenants, in that, more then one person owns a share of the property. However unlike joint tenants the parties are free to sell or gift their share as in sole ownership.

Term:

The duration of a loan or a specific time period within that loan.

Valuation:

A report giving a professional opinion regarding the value of a property.

Vendor:

The seller of the property.

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Before you refinance your mortgage, it's a good idea to make sure you understand all the in's and out's of the process.That the whole aim of this site - to get you up to speed on refinancing with good unbiased information. This is the by far the best way to make sure you get the best deal and have a happy home refinance.

Step 1: Should you refinance your mortgage?

There are many situations where home loan refinancing can be a benefit to you. From saving thousands, consolidating debt to tapping into your home equity, refinancing could be the solution to your problems. Read our article Should I Refinance My Mortgage to see if refinancing your home loan is for you. You can also use our Refinance Loan Calculator to see if the numbers add up and it is in your best interest to refinance.

Step 2: Be aware of the dangers of mortgage refinancing

As in any industry there are some bad eggs in the mortgage broker community. These dishonest brokers put their personal profit before your financial well being. To make sure you don't get ripped off make sure you read our article Dangers of Mortgage Refinancing and become aware of the how to avoid this potential pitfall.

Step 3: Learn how to pick the best mortgage broker

To get the best mortgage refinancing deal you need to deal with an honest broker that genuinely has your best interest in mind. These brokers usually follow certain practices when dealing with their customers. Read our article How to Pick the Best Mortgage Broker to find out what these practices are.

Step 4: Understand the different mortgage loan types

Home loans come in many shapes and sizes. Each home loan type serves a different purpose. What loan is best for you depends on your situation, and the reasons why your refinancing your mortgage. Flexibility and having the option to repay your mortgage faster might be more important then having stability of your repayments. Read this list of the most common Home Refinance Loan Types to understand what your options are.

Step 5: Find a mortgage broker

Armed with this essential home refinance information you can now safely find a broker to refinance your home loan. If you want, feel free to take advantage our Refinancing Right team's hard work and use one of our Recommended Brokers.

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When it's time to trade-up your first car, you must select a suitable replacement from the many makes, models, and optional upgrades available. Thankfully, choosing your trade-up mortgage won't be as complicated. But there are still some decisions to be made.

Understanding your options

Let's revisit the common refinancing objectives discussed in Chapter 1:

• Lower your monthly payment
• Shorten your pay-off term
• Optimize your loan structure
• Consolidate your debt
• Fund large, one-time expenses

The first three can only be accomplished with a refinance. The last two-consolidating debt and funding one-time expenses-can be accomplished with either a refinance or a second mortgage.

To decide between a refinance and a second mortgage, compare your mortgage interest rate with current market rates. If you're paying more than what's available, a refinance will lower your overall interest costs. If you're paying less, a second mortgage might be the better option. When the two rates are roughly comparable, many borrowers prefer the efficiency of a refinance-one loan, one monthly payment. It's also worth noting that refinance loans generally carry lower interest rates than second mortgages.

You cannot, unfortunately, take your new debt for a test drive before signing up. Therein lies the importance of making informed decisions; refinancing your mortgage every year, after all, can get expensive. That leads us to the next topic: closing costs.

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Refinancing is when you apply for a secured loan in order to pay off another different loan secured against the same assets, property etc. If this original loan had a fixed interest rate mortgage which has now declined considerably, then you would like to avail of a new loan at a more favorable interest rate.

When is Refinancing an Option

Typically home refinancing is done when you have a mortgage on your home and apply for a second loan to pay off the first one. While taking the decision to go for the home refinancing option, it is important to first determine whether the amount you save on interests balances the amount of fees payable during refinancing.

Benefits of Home Refinancing

Imagine a scenario where you can have access to extra cash, while simultaneously lowering your monthly mortgage payment. This dream can become a reality through mortgage refinancing.

A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you'll have in your monthly budget. Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the equity in your home and enable this to take place.

Lower Refinance Rate, Lower Payments

When you purchased your dream home, the financial environment dictated interest rates. While certain factors, like your credit rating and the amount of the down payment that you were able to afford, influenced your interest rate, the single most important factor was the prevailing rates at that moment. However, interest rates fluctuate. When the Federal Reserve enters a rate-cutting period, the prevailing rates may become significantly lower than when you originally purchased your home.

By refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which, in turn, will lower your monthly payment.

Shorten the Length of Your Mortgage when Refinancing

Another advantage of home refinancing is that you can shorten the term of your mortgage. Let's say, for example, that you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term of either 10, 15 or 20 years. This can save you thousands of dollars of interest. Also, if the refinance rate is lower, but you maintain the same monthly payment, you will build up equity in your home more quickly, because more of your payment will be going towards principal.

Exchange an Adjustable Rate for a Fixed Refinance Rate

When interest rates are low, adjustable rate mortgages (ARMs) are the housing market's darlings. However, as interest rates increase, that adjustable rate may not look as sweet. It's also possible that you opted for an ARM because your financial future was less secure, or you weren't sure how long you'd stay in your home. If, however, you've become financially stable and know that you'll be staying in your home for several years, it may be beneficial to swap that fluctuating adjustable rate for a fixed one. You'll have more security knowing that your monthly payment will remain steady, regardless of the current market environment.

Access to Extra Cash - Cash-out refinancing

One way to put more money in your pocket is to tap into the equity you've built in your home and do a "cash-out" refinancing. In this scenario, you can refinance for an amount higher than your current principal balance and take the extra funds as cash. This can provide money for remodeling your home, paying off high-interest rate bills, or sending your kids to college.

Bye, Bye PMI

If you were unable to make a down payment of 20 percent when you purchased your home, you may have been required to purchase Private Mortgage Insurance (PMI). If your house has appreciated since then, and you've steadily paid down your mortgage, your equity may now be more than 20 percent. If you refinance, you will no longer need PMI.

In many ways, your house is like a cash cow. If you have discipline and knowledge of the benefits of refinancing, you can tap into its milk for years to come.

To find the best refinance loan offers complete our short form. You will find lenders and brokers that offer home refinance loans in California, Florida and all other states.

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No-Closing Cost

Borrowers with this type of refinancing typically pay few upfront fees to get the new mortgage loan. In fact, as long as the prevailing market rate is lower than your existing rate by 1.5 percentage point or more, it is financially beneficial to refinance because there is little or no cost in doing so.

However, what most lenders fail to disclose is that the money you save upfront is being collected on the back through what's called yield spread premium (YSP). Yield spread premiums are the cash that a mortgage company receives for steering a borrower into a home loan with a higher interest rate. The latter will even eventually lead to borrower's overpaying.

Cash-Out

This type of refinance may not help lower the monthly payment or shorter mortgage periods. It can be used for home improvement, credit card and other debt consolidation if the borrower qualifies with their current home equity; they can refinance with a loan amount larger than their current mortgage and keep the cash difference.

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Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Typically, this amount is expressed in "points" (also sometimes called "premiums"), with each "point" being equivalent to 1% of the total loan amount. Therefore, if the refinance option selected involves paying three points, then the borrower will need to pay 3% of the total loan amount upfront. Most refinancing lenders offer a variety of combinations of points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. Alternately, some lenders will offer to finance parts of the loan themselves, thus generating so-called "negative points" (also called discounts).

The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.

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Most fixed-term debt contains penalty clauses (known as "call provisions") that are triggered by an early payment of the loan, either in its entirety or a specified portion. In addition, there are also closing and transaction fees typically associated with refinancing debt. In some cases, these fees may outweigh any savings generated through refinancing the loan itself. Typically, one only rationally considers refinancing if the potential for a substantial cost savings exists, or if there is a need to extend the loan due to weak cash flow or other non-recurring commitments.

In addition, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan, depending on the type of loan used to refinance the existing debt. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.

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