To refinance or not to refinance?

When looking at your home loan, deciding whether or not to refinance can be tricky business and you want to make sure that you're making the right choice for your individual circumstances. As more and more home owners are seeking to refinance, lenders are now offering more competitive options to do so and it can be tempting to jump at the first one you see. However, just because you've found a better rate doesn't always mean that you'll end up saving money and you want to ensure you're making a decision based on the lifetime of the loan and not just the immediate savings you might see. When executed correctly, however, refinancing your mortgage has the potential to save substantial time and money on your mortgage.

REVIEWING YOUR MORTGAGE:

There are many things to consider when thinking about refinancing your mortgage and the decision to go ahead with it shouldn't be made until all variables have been addressed. Even if refinancing isn't really on your radar, it's a good idea to review your mortgage every 3 or so years to ensure you're still receiving the best deal for your circumstances (which have likely changed since first acquiring the loan) or whether a new loan might be able to offer you more flexibility. With heightened competition in the lending market, lenders are now offering far greater deals than was previously available, so it's always beneficial to shop around. Need some advice? Rather than going direct to the banks, consider a reputable mortgage broker such as Mortgage Choice Bayside who can help with everything from reviewing your loan to securing a shiny new one and everything in between.  

REASONS TO REFINANCE:

So why refinance? People may choose to refinance their home for a number of reasons, some of which include:

  • Seeking a better interest rate (especially at the end of a fixed rate term)
  • Accessing equity to upgrade or renovate your current home, or to pursue other goals (education, holidays, family, etc)
  • Consolidate personal debts (such as credit cards, personal loans, school debts, etc)
  • Reaping the tax benefits associated with refinancing and investing funds into something profitable
  • Financial situation has changed (ie change in occupation, having kids, etc)
  • Seeking a fixed-rate loan or a loan with more flexible features (such as redraw capabilities)

WHEN YOU SHOULDN'T REFINANCE:

Refinancing is not always the greatest option for everybody and if your only goal is to acquire a lower interest rate, you'll want to do a little digging to make sure the pro's of refinancing outweigh the con's in the long run. There are a number of reasons refinancing may not be right for your circumstances, some of which include:

  • Poor credit rating subsequent to outstanding debts
  • Prepayment penalties on your existing loan are excessive
  • Income source is not stable
  • You’re close to paying off your mortgage
  • You're thinking of selling the property in the near future

THINGS TO CONSIDER:

If you decide to go ahead with refinancing your home loan, or are at least considering the option, here is a quick check-list of everything to take into account before making the move:

  • What is your current financial situation?
  • What are your current/future goals?
  • How have your needs changed from the time you secured the original loan and how could a new loan meet these needs more accurately?
  • What fees will you be required to pay if you exit your current mortgage? For example, break/exit and discharge fees, deferred establishment fees, etc
  • What are the upfront/ongoing fees associated with the new loan? For example, entry and application fees, valuation fees, settlement fees, stamp duty, mortgage registration fees, loan service costs, mortgage insurance, etc
  • Does the sum of ongoing fees exceed the higher rates associated with the existing loan?

Whether you’re looking seriously at refinancing your mortgage or you’d simply like a little help reviewing your current loan, Stuart Pullar at Mortgage Choice is always here to help. As the owner of 4 Mortgage Choice franchises and over 10 years’ experience in the industry, Stuart has the tricks of the trade and at no cost to you! Call Stuart today on 07 3463 0500.

Posted in: Refinancing

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