Be careful when you refinance your home loan


The Reserve Bank of Australia cut interest rates recently and this could make refinancing your mortgage look tempting and worth researching. Locking in a lower rate can mean big savings but there are some things to consider before you consider going the path of home loan refinance.

Home loan refinance

Have you changed jobs, started your own business or have you or your spouse retired? If so, then the lender will definitely take this into account when looking at your ability to repay the loan.

There are many fees to think about as well. Possibly there are fees for breaking the contract with your current lender if you have a fixed rate mortgage. Fees for breaking a variable rate mortgage contract were banned in 2011 but there will be fees for preparing the documents on finalizing the payout of the current loan. Fees for applying to a new lender, making an up-to-date valuation on the home and fees for switching the mortgage with the land registration office can all add up to over $1000.

Refinance your home loan the smart way

Different kinds of mortgage refinance offer different advantages and it is crucial to compare the options. Fully featured mortgages can offer some advantages for saving but a basic mortgage will usually cost less. Deciding between a fixed rate mortgage and a variable rate mortgage can be one of the biggest decisions you will make and both have their advantages. Which one you take will all depend on your individual circumstances. Fixed rate mortgages have the benefit of you knowing exactly what your repayments will be for a fixed period but there might also be fees if you want to repay early or break the contract. Variable rate mortgages can be attractive because of lower rates but the repayments can go up fast when the interest rates eventually rise.

It might be to your advantage to stay with the same lender and talk about amending the contract. Your lender will typically want to keep you as a client and they might offer you a better deal than you can find anywhere else. Researching the competition and the different mortgages available can really pay off in the long run. Make sure that you are exploring all of your options when it comes to lenders and brokers since everyone of them will have different offers that could attract you. A lender’s history can be a defining factor so make sure to research how they have raised and lowered rates in the past. If they take too much time to lower rates after the RBA had lowered their rates, then it could end up costing you a lot at the end of the month. Some lenders have been known to raise rates out of cycle and that can be a hint as to what kind of lender they are.

There are many things to take into consideration when you are thinking of refinancing your mortgage. So being careful about making this decision can be highly beneficial for you. If you need more information or some expert advice about a refinance, contact NSW Mortgage Corp where you can get free consultation on these matters.

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