Timing is everything when it comes to refinancing your home loan, both in a personal and market sense. Personal being your own financial circumstances and wants, market being the official cash rate, Australian economy and the lending market in general.
But, before jumping on the refinancing wagon, it’s important to define what you’re seeking to achieve before you refinance. This is due to the fact that refinancing can be expensive, with added fees and charges. Therefore, if you refinance frequently in order to chase the lowest interest rate, you can chew-up any savings that you may have possibly made.
Some of the most common refinancing goals that we encounter are as follows:
- Reducing monthly repayment obligations.
- Reducing the amount of interest repaid over the term of the loan.
- Consolidating debts.
- Gaining additional home loan features for greater flexibility.
If you’re looking to be in your home long-term and your current interest rate is 1 percent higher than the average variable interest rate on the market, then it could possibly be the right time for you to refinance your home loan. But, before you make any changes you need to review your existing home loan, talk to your current home loan provider, and then look at alternative home loans.
- Review your existing home loan – Know how much interest your paying, what type of loan you have and the features that are included. Also know how much you owe on your home loan and your loan term.
- Discuss your options with your existing lender – Your existing lender may be able to offer you a better interest rate without you needing to change lenders. Find out what packages are available and how much these cost.
- Compare home loans – Compare your existing home loan to other home loans on offer. Look at the options and weigh-up the pros and cons. To carry out an accurate home loan comparison, use the eChoice calculator. Simply type in the details of the home loans to see if refinancing is a cost-effective solution.
- Define how much it will cost – Know how much exit fees are from your existing home loan, along with the establishment costs of a new home loan. Know how much your current home loan will cost you over the same term. Work out how much you’ll save by refinancing your existing home loan. Make sure you take ALL costs into consideration.
Learn more about Refinancing, with eChoice’s free Refinancing Guide.