Keystart is known as a transitional finance lender, but what exactly does that mean? It’s quite simple really. This guide runs through the steps involved in refinancing and gives some tips on what to consider.
At Keystart our main objective is to help more Western Australians buy an affordable home of their own sooner. The main way we do this is by helping people overcome the barrier of deposit affordability. Unlike most lenders, our deposits start from as low as 2% and we don't require lender's mortgage insurance, reducing the amount of money you need upfront to qualify for a loan.
When you have built up enough equity in your home, either because you have paid off some of the loan or your home has increased in value, you may meet the criteria of other lenders and at this point we encourage you to refinance your loan.
There are lots of good reasons for this. You might be able to negotiate a lower interest rate with your new lender, or you could have your new loan packaged together with other financial services products to get a better deal. The other reason we encourage this is, when you refinance, we can then lend to another Western Australian to help them into their own home, just like we helped you.
The process of moving to another lender, or refinancing, will vary depending on your own financial situation. Interest rates are often the key deciding factor for most people when comparing lenders for home loans.
When comparing interest rates you may see an advertised rate below what you are paying with Keystart, but it is important you include all the costs associated with setting up a new loan with another lender, including things like lender's mortgage insurance (LMI), fees and charges and of course how much of a deposit you need to have upfront in order to qualify for loan with a new lender.
If you have a Keystart shared ownership home loan, your options for refinancing differ, depending on whether you have a fixed or flexible shared ownership loan.
If you have a flexible shared ownership home loan and want to refinance to another lender, your new finance must cover the current balance of your loan with Keystart and the current value of the Housing Authority's share.
If you have a fixed shared ownership loan, you are not able to refinance to another lender. If you decide to sell your property, it must be sold back to the Housing Authority for the valuation price. This enables the Housing Authority to retain properties in key locations within the Perth Metro area.
You can read more, including refinancing information, on our Guide to shared ownership.
When comparing rates, be sure to ask if the rate has a set period, often referred to as an introductory or honeymoon rate. For example, it may be that a rate advertised runs for the first twelve months of the loan, but then reverts to the lender’s standard variable rate. You also need to check what loan-to-value ratio (LVR) the lender requires and the minimum loan amount to qualify for the rate.
To help consumers compare different lenders, all Australian lenders are required to provide key facts sheets, which include comparison rates on financial products. This is a very handy tool when comparing rates and home loans. You can view our key facts sheets when you look at each of our loan products.
Keystart aims to provide a pathway into home ownership sooner with our low deposit home loans. Given the low deposit nature of the lending we provide, Keystart's interest rates policy enables us to manage our lending risk responsibly whilst remaining focussed on our vision.
Unlike other lenders, Keystart is a transitional lender. This means we encourage our customers to refinance with another lender, when they are ready to do so. Some Keystart customers never refinance but the average time it takes for our standard home loan customers to refinance is between five to seven years.
We sometimes get approached by other lenders with refinancing offers for customers. You may find it useful to view current offers on our refinancing offers page.
Home ownership is a long term goal. You may find it worthwhile making a three to five year plan for your home loan, whether you are just starting out or if you are considering refinancing your loan. Take some time to work through your options.
We have prepared these three points for you to consider, but the timing of changing lenders will vary between each person and situation.
Equity is the difference between the value of your home and the amount you owe on it. There are two main ways to build equity in your home. Your equity increases as you pay off your home loan or if the value of your home increases.
Some lenders may be able to offer other benefits with a home loan, almost as a package. This may include credit cards, insurance discounts and offset accounts. Be sure to check all the conditions on these benefits and weigh up against your requirements.
Be sure to gather all the information on any fees and charges with the new loan. All lenders will be able to provide you with all the fees and charges associated with a home loan.
Doing your research into refinancing will assist you in making a balanced decision. You will need to weigh up what works best for you in your own situation.
Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs.