Mortgage Choice broker servicing the NSW Hunter Valley region, Lauren Murphy discusses what needs to be considered when thinking about refinancing your loan.
There are many reasons that you may look to refinance your home loan. The most common are:
- Searching for a more competitive interest rate
- Changing your loan type (fixed, variable, Interest Only etc)
- To take cash out (for investment, renovations, holidays etc)
- Unhappy with current lender
- Consolidate other debts
As with any financial decision that needs to be made, you must consider the pros & cons with refinancing.
Will there be fees if I refinance
Always check first with your current lender to see if any exit or early repayment fees will apply. You will also need to weigh up the application and any other applicable fees if you decide to go with a new bank.
What to consider when seeking a lower interest rate
If you are only looking to refinance to a lender with a lower rate and are not seeking to change the loan term, get any cash out or consolidate debts, you will need to be aware the following fees may apply from your existing lender
- exit fees
- early payout penalties (particularly if you are on a fixed rate and seek to break it before the fixed term has lapsed).
- discharge fees
- deferred application/bank fees (sometime lenders will offer no fees upfront but will charge them to you if you refinance within a period of time).
If any of these fees are applicable they will increase the amount you are seeking to refinance, hence increasing your debt.
The following fees may be charged by the new lender when refinancing
- Application fees
- Settlement fees
- Lenders Mortgage Insurance (LMI)
- Valuation fees
If applicable these too would be added to your refinance amount. You will need to take this into account when comparing your existing interest rate to the new one you may be seeking. If it is just a lower rate you are seeking, it is worth contacting your existing lender first, as they may offer a reduction to keep your business. This could save time and money.
If you are seeking cash out with your refinance
Along with all the above ingoing and outgoing charges, you will also need to be aware of lenders policies regarding cash out. Some lenders will allow cash out with very minimal fuss, while others will seek an explanation of what you require the funds for. Some lenders will also only lend up to 80% or lower of the value of your property. Most lenders will not allow cash out for business purposes either.
Just a quick guide into reasons that cash out may be considered
- renovations (both structural and non-structural)
- to purchase investments (shares, property etc)
- purchase motor vehicle
It may seem like there is a lot to consider and there is, however, with the assistance of a Mortgage Choice broker we take into consideration all these aspects and match your needs and wants to the products available from our 27 Lenders and provide you with options that best suit your goals. We are here to do the work for you.
For more information please call your Mortgage Choice broker servicing the NSW Hunter Valley region, Lauren Murphy on 0408 480 562 to discuss your options. Just remember we can come to you.
TO BE CONTINUED - I will provide more in my next instalment next week