Taking on myths about home loan refinancing
Seasons change, and with it the financial conditions do too. Where once there might have been a plentiful economic climate for the home loan you took out, there may in the future be conditions that are no longer ideal for your situation. This happens to many Australians, and is why home loan refinancing is a popular option. But too often there are scary myths abound regarding this practice, which can put people off taking on the refinancing – even if it might be beneficial for them. Here are some popular misconceptions.
The cost of refinancing means it’s never worth it
This is a very short term way of looking at a refinance on your home loan. While exit fees were cut down by the government in 2011, there are still hefty duties you have to pay when you opt out of a mortgage early, of course. But while this can be a short term cost in the thousands, where you need to be looking is the long term. Working out how much you can borrow and what you will save on interest rate changes and new repayments is where your head should be, as that is where the savings will be.
The cash rate hasn’t changed, so interest rates won’t
Not necessarily true. While the Reserve Bank of Australia has kept the official cash rate steady for a near-record period of time now, this doesn’t directly control the interest rates set by lenders. Saul Eslake of the Bank of America Merrill-Lynch once said to the ABC that it is arbitrage which keeps the banks in line – this is largely due to uncertainty following the GFC.
There are many more myths to be aware of, which is why it’s important to get the right advice before you decide to renegotiate your home loan.