October 25, 2017
There’s no one-size-fits-all refinancing deal. What will help you meet your financial objectives is going to be completely different than what another borrower is looking for. When you sit down with your lender, it’s your job to get the information you need about their home loan products to ensure you are getting the best deal for you, not for someone else.
Don’t sit back and let your lender do all the talking, trying to sell you their most popular loan product rather than fully explaining your options. Here are the questions you should ask your lender.
When you refinance, ideally you won’t have to pay lender’s mortgage insurance, especially if you already paid it when you first took out your mortgage. However, if you plan on borrowing more than 80% of your property’s value, you will almost definitely be required to pay LMI. Make sure you ask what the premium will be. Premiums are different with different lenders. They will also vary depending on how risky of a borrower you are perceived to be.
Even if a discount isn’t advertised, you should still ask. Sometimes lenders will offer an incentive to encourage you to refinance with them.
There are many fees that you need to be aware of so make sure you inquire about all of them.
- Application fees
- Exit fees if you refinance again later
- Ongoing account fees
- Valuation and settlement fees
Not all banks will let you make repayments fortnightly, weekly, or monthly so make sure you ask instead of assuming. For example, some banks only do monthly repayment schedules. Find out what your options are and also when payments are generally due. Will you be able to set the day(s) of the month for the due date? Are repayments debited from a savings account? What happens if a payment is a couple days late? Find out the details to make sure the schedule works for you.
It may be worthwhile to package your accounts and credit cards when you refinance. Some lenders offer a packaged loan in exchange for an annual fee. You could save on ongoing fees when you do this while also simplifying your accounts.
Early repayments could make it easier to pay down your mortgage faster. The more you reduce your balance, the less you’ll have to pay in interest. However, not all banks allow repayments. Those that do may have limits on all or some loan products.
This is an important question when you want to refinance to a fixed rate loan. Find out the details of a lender’s rate-lock policy. Will they charge a fee? Can you keep the rate for the date you file your application?
The more you can learn, the easier it will be to choose a great loan when you refinance. Bring your paper and pencil, have your questions ready and get the answers you need. Taking this active approach will make you a better-informed borrower and it will give you more control over your refinance.
Written by Refinancing.com.au
Refinancing.com.au is an end-to-end service that helps people refinance their home loan. We empower you to search for your home loan, and choose the process that suits you.
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