Mortgage Refinance, Are You Literally Throwing Money Out The Window?By Dave Fleming : 12 December, 2018
Thousands, no tens of thousands of Australian families inadvertently flush their hard earned after tax dollars down the drain.
Simply because they keep delaying doing something about a mortgage refinance.
Are you overdue?
Home loan refinancing may be easier than you think.
While there are no hard rules about a home loan refinance, it makes financial sense to review the loan whenever your individual circumstances change.
For example, you may be growing your family, moving to a new location, wanting to purchase an investment property or getting married.
There are also plenty of reasons that exist outside personal circumstances, including the major financial benefits refinancing can offer, and we’ll run through some of these below.
The No. 1 Refinance Rule is to Get a Better Rate
Refinancing your home loan doesn’t necessarily mean you have to change banks. There can be a multitude of reasons why a homeowner will refinance their mortgage in order to get a lower rate.
Today’s loan market has slowed down and it is getting more and more competitive. Any home loan that was settled two or three years ago could very well need to be looked at to see if it’s still as competitive as it could be.
There is such a thing as interest bracket rate creep. So, you need to keep an eye on what your lender is doing and any rate increases they stick you with.
Nonetheless, if your bank isn’t prepared to come to the party and give you a market competitive deal there is no shortage of lenders out there that will give you a much better proposition.
Put a Padlock on a Great Home Fixed Loan Rate
Interest rates have been at record lows for some time now. In fact, the official cash rate is still at 1.5% and has been for 21 consecutive months.
However, how long can they stay that low!
Some are saying it’s possible that by the end of this financial year, or even before we’ll see an interest rate increase from the RBA.
Although a number of financial experts are saying that official rates could go up in the next 12 months, we’re already seeing a number of lenders starting to independently move rates up.
The reason for this is the pressure they’re getting from the increased cost of sourcing funds from overseas.
There is no better time than now to get your mortgage broker to find you a great fixed rate. Lock it in and allow yourself to ride the low interest rate boat for even longer.
Refinancing helps to reduce the interest payable on the different loans you have, which can include credit card, car loans or personal loans.
It basically involves combining all the loans into a new mortgage, giving you one simple repayment to make each month instead of a bunch of them – which can lead to late fees if you forget one.
The Best News?
All your debts are charged at the home loan interest rate – which is usually much lower than a credit card rate!
Increase your investment
If you are looking at your investment options but are financially constrained, it’s time to consider refinancing your mortgage.
Where one bank may limit how much you can borrow another one may be more liberal.
All banks are not the same when it comes to borrowing capacity.
Generally speaking when you leave one bank to go to another your old bank is going to charge you an exit fee of $350 (some banks may vary) for each loan you discharge from them.
Going into your new lender, they may charge you a legal or settlement fee of around $200 to $220.
There will also be some Government registration fees to account for. These will vary from state to state and your mortgage broker will bring you up to speed on those.
When Should I Refinance?
Your mortgage broker should have access to refinancing comparison software that can quickly show you if it’s monetarily worth your while refinancing.
Your mortgage broker can also help take some of the inertia out of the process by scanning the market for the best deal for you and then helping you to get your documentation organised.