August 14, 2014
Thinking about switching home loans?
Wondering if the savings will outweigh the costs?
A Mortgage Choice broker can help you determine if you will save money when you refinance.
What is refinancing?
If you currently have a home loan, and you want to switch to a different loan product or lender, put simply, refinancing refers to the process of paying out your current loan and taking out a new one.
As with anything related to property, everyone is different and has a unique situation. There is a multitude of reasons why people refinance, these include, but are not limited to:
- To secure a better interest rate
- To switch between variable and fixed rates
- To access equity in your home
- To consolidate debt
- To access additional home loan features such as:
- Flexible repayments
- Repayment holidays
- Offset accounts
- Redraw facilities
- Flexible rate options and,
- Loan portability
For more detailed information on any of the above reasons, please click here.
As with most things, change almost always comes with a price. However there can be some fantastic financial benefits in refinancing your home loan. The key point to remember is that it’s worth having a chat with a Mortgage Choice broker to explore and balance the potential costs involved with any potential savings. If you are refinancing with a goal of reducing your monthly repayments, or saving on your overall/ long term interest costs, it’s vital you look at how long it will take to recoup the costs of refinancing with the savings on the new loan.
Sometimes it’s worth asking: could it pay to stay?
Generally though, depending on your circumstances, the costs involved with refinancing could include:
- Exit fees – the cost of paying out a loan early, usually within the first three to five years of your term. These fees are calculated either as a percentage of the remaining loan balance, or they could be a set charge. Your loan contract should outline these costs for you.
- Break costs- these can be in addition to exit fees, if you have a fixed rate loan that you want to break out of before the fixed rate term expires. Often it is not worth refinancing until you are clear of your break costs and exit fee term.
- Borrowing costs- If you change lenders, some lenders charge a range of upfront fees. These vary between lenders and often can be negotiable, that’s where a mortgage broker’s relationships with lenders can help you save on your refinance costs. The upfront fees may include:
- Loan application fees
- Valuation fees
- Settlement fees
- Other costs could include refinancing Lenders Mortgage Insurance and the repayment of stamp duty and associated fees.
For more detailed information on any of the above costs, please click here.
What are the potential savings?
The best way to determine if there is any potential savings for you if you were to consider refinancing, is to talk to a broker. They have valuable insights into the world of refinancing and if it will be the best option for your unique situation.
Moving from a variable rate to a fixed rate, or vice versa, doesn’t always have to involve refinancing. Your broker can determine if your lender will provide this option without the need to switch from one loan to another, which can save you a whole lot of brain power, (and potential costs) in making the decision about whether to refinance or not.
How do you determine the potential savings?
Mortgage Choice brokers offer a free home loan health check service.
There is competition out there for your mortgage between lenders.
You might be surprised by the different choices available to you.
The home loan health check basically lets your broker see if your current loan is still the best one for you, and/or checks if there Is a loan product out there more suited to your budget and needs, and even better, is at a potentially lower cost to you.
With interest rates remaining at historic lows, it makes sense to see if refinancing could work for you.
All it takes is an hour of your time.
Daniel is ready to help you determine if you should stay, or if it might just be time to move on.
For further information on this or any other topic, please contact your mobile mortgage choice broker, Daniel Meade on:
Phone 07 3833 9666,
Or simply click on the contact us tab on this page.
If this information has been helpful to you or might be relevant to someone you know, please share it.
Daniel is looking forward to helping you refinance and save today. Thanks for reading our blog.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.