Thinking about refinancing your mortgage?
In light of recent record low interest rates; making sure the rate on a loan obtained years ago is still competitive is no doubt on many a mortgage holders’ agenda. Here are some tips and tidbits on refinancing your loan for a better interest rate.
1. The refinance process isn’t as difficult as it may seem
The refinance application is similar to a purchase application which most mortgage holders have already been through. Standard procedure usually involves the bank verifying your financial situation and valuing how much your house is worth to confirm there is enough equity to refinance over. As long as these two points stack up and you have had good conduct on your existing mortgage, there usually isn’t a problem with the new lender accepting an application to refinance over.
2. You should look into refinancing every two years
Interest rates can change substantially in a couple of years. As a rule of thumb, you should shop around at least every two years to make sure you’re not paying more on your home loan than you should be.
3. There are costs involved with refinancing
Unfortunately, refinancing to a different bank is not a costless process. Fees and costs associated with the refinance usually involve a discharge fee from your existing lender; government fees for the discharge of the existing mortgage and registration of the new mortgage and any application fees with the new lender. If you have a fixed loan, there will be a break fee involved for ending the fixed contract early. It is always a good idea to speak to a mortgage broker to help give an accurate representation of the costs involved and weigh up against the amount of money you’d be saving in order to work out whether refinancing is suitable for your situation or not.
4. Apart from negotiating a better rate, see if you can also negotiate a cash rebate
Further to the point above, some banks are able to offer a cash rebate should you be happy to refinance over. This rebate can potentially cover the cost of refinancing and at times even leave some extra funds in your pocket.
5. You can potentially look at increasing your loan to consolidate other debt
Interest rates on mortgages tend to be substantially lower than rates on credit cards and personal loans. Given you have enough equity in your property, a good option may be to consolidate your credit card/personal debt along with your refinance so that you pay a much lower rate on that debt.
If you’d like to discuss refinancing your mortgage, please contact one of our Lending Specialists, complete your details below and we’ll be in touch or give us a call on 03 9835 8200.