Is Refinancing Right for You?

July 11, 2017

Is Refinancing Right for You?

A lot of people are attracted to the idea of refinancing. After all, if you get a lower rate and save money, what’s not to love? Wondering, should I refinance, is it worth the effort? To find out if refinancing is right for you, take a look at these common refinancing questions and answers. The more you know about what is involved, the better placed you are to make a wise financial decision.

What Are the Benefits of Refinancing?

There are lots of great reasons to refinance. Some borrowers are simply after lower interest rates and a cheaper loan. Lower rates can also make it easier to pay down your loan faster. You may also choose to refinance because your credit has improved or your income has increased, which means you may be able to qualify for a better loan.

Other reasons include:

  • To use built up equity to renovate, invest, or consolidate debt
  • Switching lenders because of a bad experience with the current lender
  • To move from a variable to a fixed rate or vice versa
  • To get a longer term if you need to lower your monthly repayments, but can’t necessarily get a lower rate

What Costs Are Involved?

Understanding refinancing costs is essential for determining whether you should apply for a new home loan or not. It’s important to weigh the costs against your potential savings that you’ll enjoy with a lower rate. Here are the basic fees and expenses, although some lenders will waive or reduce fees in order to attract your business.

  • Exit fees
  • Loan application fee
  • Settlement fee
  • Valuation fee
  • Lender’s mortgage insurance (if your current equity and deposit isn’t enough to avoid paying LMI)

Will I Pay Less in Interest?

This is the primary reason why people refinance – to get a lower rate. This is where you should do your research and compare what interest rates lenders are currently offering. Keep in mind, rates can vary significantly from one lender to the next. Also, look at all the features involved to ensure you apply for a loan that suits you. For example, if you want to pay down your loan as fast as possible, look for features like a free offset account and free additional repayments.

Should I Consult a Broker?

A mortgage broker can help you find the most suitable home loan options for your financial needs. Brokers will also help you take an honest look at the costs and risks of refinancing to help you determine whether you should refinance right now or if it may be better to wait. Factors like an increase or decrease in your property’s value or a change in your credit score can have a huge impact on your ability to get the loan you want when you refinance.

Whether you opt for the guidance of a broker or not, be sure to thoroughly review your options. Compare rates, look for refinancing offers, and evaluate your own financial lifestyle habits. If you determine you would benefit, with so many lenders out there, you’ll have no problem finding the perfect loan for you.

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