eChoice Home Loans

Here’s how to make sure refinancing leaves you better off – and a list of traps to avoid.

Pay off debts quicker and cheaper by rolling them into your home loan

Right way

Make sure your new loan repayments get your loan paid off as quickly - or even faster - than the previous smaller home loan did.

Wrong way

Roll smaller debts into your home loan, but extend the term of your home loan - so that you are effectively paying interest on small debts over 30 years, instead of the previous one or two.

Create an "all-in-one" loan that lets you apply all your spare money to repayments

Right way

Have your lender do the calculations that show you'll come out ahead - usually because you have $10,000 or more sitting in your bank account.

Wrong way

Jump into an all-in-one loan that actually costs you money because you pay higher interest than you would on a basic, no-frills loan.

Change from fixed to variable rate, or vice-versa

Right way

Decide how much financial uncertainty you can stand, knowing that fixed rates tend to be slightly higher on average and that switching loans has a cost.

Wrong way

Switch from variable to fixed or fixed to variable because that type of rate is falling fastest at the moment - then wonder why you did it when rates change again.

Raise money to buy a car, finance a business, take a holiday or achieve some other goal

Right way

Identify how much you need, and set a repayment schedule that will pay off the larger loan in the minimum of extra time.

Wrong way

Borrow more than you need and end up facing repayments you cannot afford - leaving you on a downward spiral and needing to refinance again.

Get a cheaper rate

Right way

Move to a loan with fewer fancy features such as "offset", but which still allows you to make extra repayments and redraw later.

Wrong way

Change to an identical product from another lender just to save 0.1 per cent on your loan, so that you're actually worse off after accounting for fees and charges.

Save money

Right way

Keep your home loan at less than 80 per cent of your home's conservative value, to avoid costly mortgage insurance.

Wrong way

Do a refinance deal wthat gives you relatively little benefit but pushes your loan value above 80 per cent of your home's value - so that you pay $1000 or more for lender's mortgage insurance.