Refinancing is smart - except when it's not

With thousands of dollars in savings at stake, taking some time to read about refinancing could result in great benefits for your long-term finances and cashflow. But, as with all things mortgage-related, there is no one-size-fits-all approach to refinancing. With that in mind, we’ve put together a short guide to help you decide if it’s time to refinance.

Benefits of refinancing
  • Get a better deal. Lenders often have enticing deals for new customers, and the interest rate for new home loan customers is generally lower than for existing ones. Some lenders will also offer a ‘cashback’ deal in exchange for your business.
  • Your introductory or fixed rate period on your loan is expiring. Fixed and introductory loans often revert to a standard variable interest rate, which is usually higher than the fixed rate, as well as others that we can find for you.
  • Change is good. Depending on your circumstances, you can increase or decrease your home loan repayments or switch to a shorter or longer loan term. A longer loan term can result in lower ongoing repayments but a greater sum owed in total, while a shorter loan term can save you money in interest overall. We offer free home loan health checks, and we’ll compare more than 40 lenders to find you the most suitable rates in Australia.
  • Access better loan features. Interest rates shouldn’t be your only consideration when you are reviewing your current mortgage. Not all home loans offer the same features or flexibility. For example, you may be interested in an offset account, redraw facility or split loan.
  • You can access the equity in your home. Home equity can be used to pay for things like renovations, a car, a holiday or even a deposit on a second home.
Things to look out for
  • Make sure you understand what happens when your current interest rate expires and be prepared to adjust when it’s time. We recommend getting in touch with us at least 2 months before the expiry date, so we can review of all your options and find the best deal.
  • Higher fees need to be justified. Normally people don’t refinance to loans with higher fees unless it is justified in the interest rate or cash back incentive.
  • You may have to pay Lenders Mortgage Insurance again. Put simply, you shouldn't refinance if you are going to incur LMI again. The exception would be if you are using a low deposit lending provider such as Keystart, on which basis you should check your equity position before adjusting.

If you’re reading this article, you’re likely already in the property market and working to build a financially secure future – but wondering if it’s enough. That’s how we can help. The team at Beyond Broking deals with post settlement enquiries on a daily basis. We’ll help you uncover how much you can borrow, what size deposit you need, and the costs you’ll encounter – and we’ll take care of the paperwork for you.

Contact us today for a free personalised consultation that will give you clarity and help you save time and money.

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