23 Nov Refinance: what / why / how ?
What is ‘Refinancing’?
Refinancing involves taking out a new home loan to pay out your existing one. It can be done through the same financial institution but usually implies switching to a different lender.
It is true that you would have to consider some upfront financing costs, but these are often easily outweighed by the savings made over the life of the mortgage.
Most of the time people want to refinance to secure a lower interest rate. They can also reduce their repayment by lengthening the loan term, access improved terms & conditions from competitor offers, tap into their home equity, or a combination of all. It can be a great opportunity to manage and consolidate existing debt, reduce the term of the loan or purely save on costs.
Refinancing can also be the answer to your property investment goals. Accessing equity from a home means freeing up a potential deposit to buy an investment property.
It might be the time to switch from fixed to variable or the other way around. You could fix the interest rate should you want to lock in your repayments without worrying about market volatility or take advantage of a lower interest rate.
How to refinance?
This is where you need a trusted mortgage broker who will help you to effectively compare all the fees and features of the new products, through an extensive panel of lenders. A professional broker will make sure the products are adapted to your situation and meet your very own needs and requirements.
Costs can easily be hidden, and every aspect of each product should be assessed before you engage into a refinance; exit fees, set up fees, ongoing fees, settlement fees, interest rate, features etc…
Sometimes, lenders offer an attractive ‘honeymoon rate’ for the first couple of years however it is more than likely that the interest rate will revert to a higher than normal rate after this period and you will not benefit from any ‘life lasting’ discount on your mortgage.
If you do have or are building up some savings, an offset account could be a great cost-effective and time-saving option for you even if it involves paying an annual package fee. There are also very attractive and strategic tax advantages with having an offset account. Please contact me for more information and a personalised finance assessment.