September 10, 2013
Whether you are repaying a home or investment property loan, the regular contributions can be a major chunk out of the budget. You may find comfort in knowing that lenders are constantly developing more competitive loan products, which makes refinancing to get a better deal seem like a no-brainer. However, the decision needs to be made carefully.
If you’re curious to know if refinancing is the right option for you, use this simple five step guide:
1. Ask yourself why you want to refinance
You should know why you are considering refinancing. For example, you want to have a clear idea on whether you are looking to access equity in your existing property/ies to say, buy or renovate an investment property, or if your aim is to reduce your repayments, shop around for a better suited deal, consolidate your other debts into your mortgage, etc. Your goal will influence your loan choice and ultimately your decision to refinance.
2. Understand your existing loan
Before you start shopping around, make sure you fully understand all aspects of your existing property loan. This includes your interest rate, type of rate (variable, fixed or split), the available features and any fees.
3. Determine your current and future needs
Now that you have a clear goal and a better picture of your current home loan, it’s important to know what loan features you need. Questions should be asked about whether you want the cheapest loan, no matter what or if you want loan flexibility that gives you the ability to make extra repayments and redraw funds in times of need.
4. Shop around and be prepared to negotiate
There is an abundance of loan products on offer from a wide range of lenders, so make sure you check out as many options as possible. A professional mortgage broker like our selves can help you do this, usually at no cost to you.
5. Work out the total cost of refinancing
Many loans may initially look cheaper than your current loan due to a lower interest or fewer fees, but it’s important to do a full cost versus benefit analysis of switching from one loan to another.