November 03, 2014
With interest rates currently hovering around historically low levels, and some lenders offering incentives to attract new business, now is a great time to review your current home loan and make sure it still meets your unique circumstances.
As your loan matures, your situation will change, and the original loan may not be the best in your current circumstances, refinancing could add flexibilty to your home loan as well as lowering the repayments.
To determine whether or not your current home loan is still right for you, ask yourself the following questions:-
- Have your financial/lifestyle circumstances changed since taking out the loan?
- Are you looking for a ‘cheaper’ loan option?
- Are you looking to repay your loan sooner?
- Are you planning to have a family?
- Are you planning to renovate your property?
- Are you planning to downsize/upgrade your property?
- Are you dissatisfied with the service provided by your current lender?
- Are you considering purchasing an investment property/ies?
- Are you considering consolidating debts?
If the answer to any of these questions is ‘yes’, refinancing may be a worthwhile consideration.
Refinancing may allow you to repay your home loan sooner and get on the right track to achieving your next financial goal sooner.
In addition, refinancing can also often be a great way to lower your mortgage repayments, consolidate your debt or even access equity in your home. In saying that, there are a few things you should be mindful of before deciding to refinance, including:
- Watch out for fees: Before you refinance, it is a good idea to find out about any exit or deferred establishment fees that might apply if you choose to pay out your existing loan early. While exit fees were banned on all new loans taken out after 1 July 2011, they could still apply to loans taken out before this date. It is also important to note that exit fees don’t include break costs, which can be imposed if you bail out of a fixed rate loan before your loan term expires.
- Think about the costs: When you refinance, your new lender may charge a range of upfront fees, including a loan application fee, valuation fee and a settlement fee. It is worth noting that not all lenders will charge these fees and some may be negotiable.
- Lender’s Mortgage Insurance: This is an insurance designed to protect your lender in the event you default on your loan. And while you may have paid Lender’s Mortgage Insurance when you first took out your loan, it is important to know that this insurance is not transferrable, so if you borrow 80% or more of the property’s value, you will be required to pay it again.
- Stamp duty: If through refinancing you increase the size of your loan, stamp duty may be payable. In addition, you may be required to pay a Mortgage Registration Fee.
Further, when you are ready to compare home loans, it is important to look beyond the interest rate alone. Many borrowers will look to refinance with a lender that boasts the cheapest interest rate. But just because a lender has the cheapest rate, doesn’t mean to say the product is the cheapest home loan overall, or the most suited to your needs.
Before making any decisions, it is important to investigate the various fees each lender intends to charge. There are many kinds of loan fees borrowers may incur, including application fees, monthly account fees, redraw fees, additional repayments fees, rate lock fees and break fees. I can help you find out what the real cost of the loan will be once all the fees and charges have been taken into account.
For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.