Australian homeowners and investors have been enjoying record low-interest rates for more than a decade. However, none of us knows when interest rates will rise, or by how much. So as the manager of a home loan, it’s wise to periodically assess your financial position to see if there’s something better on offer.
For many borrowers, the thought of refinancing their mortgage is put in the ‘too hard basket’. But it doesn’t have to be a laborious task if you have a clear understanding of what’s involved. Here’s a list of refinancing secrets you need to know before you start.
It’s not free
Closing out your old loan may have some surprises. Some loans apply extra fees if you close the mortgage early. It can be a stated amount, or it could be a percentage of the mortgage.
The Risks of Refinancing Your Mortgage
You may incur a break-fee (if you’re on a fixed-rate loan), or Lenders Mortgage Insurance when establishing a new loan product. Other fees can include taxes such as stamp duty, brokerage fees if you opt to use a mortgage broker, and setup costs with a new lender.
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Avoid the 30-year term
The default loan term is 30-years. That’s a long time to be paying interest. When refinancing, ask lenders if you can reduce the term. Doing this will save you thousands in interest.
Investigate the comparison rate
Shop around and compare other lender’s products and comparison rates. Don’t assume the large rate in bright colours advertised on a web page is the full and final figure.
Know why you’re refinancing
You might simply want a lower interest rate, or more flexible banking options like an offset account, or to cash-out equity from your property. Whatever it is, have your objective in mind when shopping around.
Stay strong with your existing lender as they may offer you discounts
Either before or after you’ve done a home loan comparison, let your bank know you want to renegotiate. It may not be able to match a competitor’s product, but it will give you an opportunity to assess your package.
Here’s how you can receive your free refinancing report
Step 1: Enter your current interest rate and loan amount.
Step 2: Complete a few more questions so we can generate your potential refinancing savings and lowest interest rate.
Step 3: Receive your free refinancing report.