14 Nov 2019

How to know if refinancing is for you

Why you should think about refinancing

Life is constantly changing. As we get older, we realise life can be uncertain, and we have to make changes along the way. Refinancing is a way to accommodate life’s changes and challenges. The mortgage which helped purchase your first home is probably not the best one for you currently. That’s where refinancing comes in, it lets you pick a mortgage plan which is a better fit for your current needs. It transforms your mortgage into a flexible financial tool that you can use to your advantage. 

When to think about refinancing

The Reserve Bank of Australia (RBA) is continually changing interest rates on loans. When interest rates drop below your current rate, it’s time to start thinking about refinancing, because it could save you a lot of money in the long-term. It’s like investing in new car tyres so you can save more money on fuel consumption over the long-term. 

There are three common reasons people decide to refinance:

  1. Consolidating debt 
  2. Buying an investment property
  3. Significant long-term savings 

Many people avoid refinancing because it’s time-consuming, and it reminds them of the stressful process from their first home loan. However, the payoff can be significant. The expert lending specialists at Mortgage House ensure the process is as smooth as possible, allowing you to experience the savings on your home loan, quicker. 

Small changes can lead to big savings

Small changes in your home loan can result in thousands of dollars saved. The Australian Bureau of Statistics shows the average value of a home loan at $408, 987 in 2019. It’s hard to believe that just ten years prior, the average home loan was around $290,000. If refinancing can shave a few basis points off your current interest rate, it may be worth thinking about.

Always ask yourself: “am I willing to go through the process of refinancing now, so I can save thousands of dollars in the future?”

The costs associated with refinancing 

When looking to refinance, it’s crucial to use a lender who always runs the numbers and is openly transparent about what the ‘real’ costs will be. Beware of being taken in by ‘neat’ features. Just because a particular rate or feature is attractive on its own, won’t mean that it’s beneficial for you in the long run.

There are 4 main categories for costs and fees associated with refinancing:

  1. Borrowing – Establishment – Package
    Fees that are associated with opening a new home loan account.
  2. Exit – Discharge
    The fees involved in closing your old home loan.
  3. Legal – Government
    The standard government charges and fees.
  4. Valuation – Appraisal
    A valuation is a formal process which determines the market value of your property. An appraisal is a ‘guestimate’ of what your property is worth. 

Be sure to speak with your lender in detail about how refinancing fees will affect you. 

Measure the ‘soft’ costs – your experience counts

It’s easy to focus on saving dollars and cents and lose sight of the potential experience you’ll have with your lender. Refinancing a home loan means getting into a long-term relationship with your lender. It’s important to know your lender is working hard for you. Your confidence and satisfaction with your lender, or lack thereof, will add up over a 15 to 30 year loan period. Find a home loan provider who’ll help you save money as well as look after your long-term interests – they’re going to be with you for a long time. 

Mortgage House 

At Mortgage House, we find the home loans that are the best fit for our customers. If you’re thinking of refinancing, you can Apply Online today to get started.

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