With many of the lenders on our panel recording some of the lowest interest rates ever, you might be considering leaving your current bank and refinancing your current mortgage, just like a lot of our clients in Perth have been doing.
Refinancing can help you to reduce the interest you are currently paying on your mortgage, thereby saving you thousands of dollars.
Of course, before you dive in and start the refinance ball rolling, it pays to understand what you’re getting yourself in for.
I’ll cover some of the refinancing questions most commonly asked by my Perth clients, to help you understand whether this mode of attack is right for you and your financial situation.
What is refinancing?
In its simplest form, refinancing is the replacement of an existing debt obligation with another debt obligation under different terms.
Refinancing can allow you to;
- extend the length of your loan,
- take advantage of lower interest rates in order to substantially reduce your monthly mortgage payment, or
- look at other banks that might suit your needs better.
What does it cost?
While there are some serious benefits associated with refinancing, the process can prove very costly if all of the angles aren’t covered. As such, it is important to weigh up the different expenses that can be involved to make sure it is the right choice for you.
The costs associated with refinancing vary from borrower to borrower depending on their unique set of circumstances. That said, as a general rule of thumb, when refinancing you could potentially run into the following costs:
- Exit fees may apply when you pay out of a loan early or break your fixed term.
- When you refinance, some lenders will charge various borrowing costs, including: a loan application fee, valuation fee and settlement fee. It is important to note that not all lenders will charge these fees and others will be happy to negotiate on the price.
- Lender’s Mortgage Insurance (LMI) will apply if you borrow 80% or more of your home’s value. While you may have paid LMI when you first took out the home loan, it is important to note that this fee is not transferrable and will have to be paid every time you borrow above 80% of the property’s value.
- Stamp duty may be payable when you refinance, though it is important to note that this will vary depending on your location.
Why should I refinance?
One of the most common reasons why borrowers choose to refinance their mortgage is to take advantage of lower interest rates.
However the benefits can quickly drop off if the costs in doing so are too high.
That’s why at Mortgage Choice in Scarborough we provide a full cost analysis to compare the loan you have with the proposed loan, taking into account all of the costs to make sure it’s worth your while, and give you a good idea of the real savings you will make.
How can I be sure that I'm getting the best deal?
Generally it’s pretty straight forward.
Look at the repayments and the term.
If the broker has taken into account all costs, the term of the loan is the same and the monthly repayment is lower then you’re on the right track.
One of the easiest things you can do is to ask us, your broker, for a full cost benefit analysis on your current loan compared to what’s on the market.
Interested in a full analysis?
If you want us to take a look at your current loan and provide you with a full cost benefit analysis of switching loans, feel free to either call Jason Coviello on 0438 211 745 for a chat or send through any questions via email to firstname.lastname@example.org
If you’d rather be social about it, feel free to head across to myFacebook Page and see if there’s already an answer to your question or pm me.
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