Are These Refinancing Misconceptions Holding You Back?
Gone are the days when borrowers would stay with the same lender for the life of the loan. With interest rates at a record low and competitive deals on offer, refinancing your home loan has probably crossed your mind.
Refinancing your home loan could be a smart step towards achieving financial independence sooner. If you’ve been thinking about refinancing but keep putting it off, we clear up some false notions that may be holding you back.
I don’t see the point of refinancing
Consider this: if you’re juggling multiple debts like credit cards, study loan, car or personal loans, as well a home loan, refinancing may help you take back control of your finances.
Accessing the equity in your home loan to rolling all your debts into your mortgage for example, would allow you to benefit from the same low-interest rate as your home loan. Plus, you will only have one loan and monthly payment to manage.
Refinancing is going to cost a lot
Since 2011 there are no more home loan exit fees and refinancing has become easier. Some common refinance costs to inquire about, though, are fees to discharge the loan, valuation fees and Lender mortgage insurance (If you have less than 20% equity in your property)
Look for a lender who offers super low-interest rates, little or no upfront fees or ongoing fees. The savings you will make, over the life of the loan sometimes far outweigh the initial setup costs. However, it is prudent that you do your research beforehand to ensure you are getting the best deal.
It’s just too much hassle
It does take initial effort on your part but then it’s usually a streamlined process. Most lenders, like Mortgage House, are eager to help borrowers find the right home loan option to suit their financial circumstances and goals.
In fact, you could start by comparing interest rates from different lenders. Then, if you’re happy with your current lender, simply contact them to see if they will reduce your rate to match. If you succeed, you would be able to reap the benefits of refinancing without much hassle at all.
The application is typically stress-free especially if you can already demonstrate a steady financial commitment. It will be handy to have the loan statements for your current loan and recent payslips to fast-track the process.
It’s not worth refinancing with another lender if the rate is only 0.5% lower
Any interest rate discount can have a savings impact. Sometimes, the combination of the lower rate and home loan features you didn’t have before like an Offset Account on a fixed-rate loan or no monthly fees if you’re currently paying them, could add up and help save you money on your home loan.
For example, if you had a $400,000 loan over 30 years with a 5.5% interest rate but then you refinanced to a loan of 5.0%, you could save close to $45,000 over the life of your loan.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of buying a home, you can contact us for advice about the best options for you when it comes to your mortgage. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.