The top 5 things to look out for when you are looking to refinance.

After taking out a home loan, people’s circumstances can change. In fact, it is inevitable that your personal and/or professional life would have evolved since the time you first took out a home loan. In such cases, people often turn to ‘refinancing’.

Refinancing can involve transferring your current home loan to another bank, which may help improve your financial situation, including lower interest rates and fees, easier repayment terms or better loan features.

It's worth spending some time and effort thinking about why you're refinancing - and what potential benefits you hope to gain from it.

To help you out, we have compiled a list of the top 5 things to look out for when you are looking to refinance.

1. Assessing the value of the property and your ability to borrow

As the bank will reassess the borrower's current repayment ability and the value of the home, factors such as changes in employment, new children in the family, new car loans and new credit card applications, changes in bank deposits, and any changes in the structure of the property will all have an impact on the assessment result. This must be reconsidered in a comprehensive manner to avoid rejection by the bank.

2. The consideration of cost

For example, bank exit fees, loan application fees, annual bank fees, valuation fees, time costs, etc.

If the interest savings from the transfer does not cover the above costs, the transfer will need to be re-considered.

3. Knowledge of preferential interest rates

It is true that many banks have recently offered more favourable interest rates, but there is a period of time (about four weeks) between the start of the preparation of the documents and the bank's assessment and re-release of the loan, during which time attention needs to be drawn to whether or not the bank is still in the process of offering a favourable interest rate and whether or not a favourable interest rate is available - after all, bank interest rate policies can change weekly.

If you need to lock in your interest rate you may have to pay other additional fees.

4. Comprehensive comparison of loan products from various banks

Banks will have some incentives for transfer customers, such as cash back offers, complimentary bank points or covering the transfer fees.

5. Use of additional loan funds

This money needs to be used well before the transfer to avoid the stress of repaying the loan due to blind spending.

Common ways additional loan funds are used are to provide a down payment for a new property, to put cash into an offset hedging account, or to buy a car to avoid the high cost of a car loan.