July 17, 2017
Editors running out of headlines can sensationalise about how refinancing can save huge $$$. It may be true but is likely simplifying matters:
1. What if the new lender offers a phantom rate i.e cheap rate for 1-3 months before raised rates. Are you to refinance again at a cost of $800 - $1,000 in lender and government charges?
2. With borrowing power tightened by 20-30%, many people borrowing to their maximum limit before 2016 may be unable to refinance. 3. Are you comparing apple with orange? A basic variable loan without offset cannot be compared with an offset variable or line of credit product.
4. What about inflation? The $50,000 face value savings in the article is reduced to $20,000 of intrinsic value if inflation of 3.00% is factored.
5. Refinance can take up time and time is money. Substantial paperwork has to be supplied. There will be teething issues such as having to have new cards issued, automated direct debit changed and salary credit arrangements reset, etc.
To every issue, there will be an enticingly simple answer and it is often wrong. If it's all so easy, we would all be in our Bentleys to the airport, flying to St Moritz en route Dubai for a shopping spree, via Etihad Residence class.