This week, we’ll be discussing an important topic for homeowners and investors: refinancing your home loan. Whether you’re considering refinancing for better rates, additional features, or other financial goals, these tips will help you make an informed decision.
1. Understand the difference between the variable and the comparison rate.
While low variable rates may seem enticing, they often come with additional costs like annual service fees or monthly charges. Always consider the comparison rate, which includes all associated costs, to get a true understanding of the rate you’ll be paying.
2. Factor in lender’s mortgage insurance (LMI).
If you’re borrowing above 80% of your property’s value, lenders typically charge LMI. If you refinance, you may need to repay the LMI based on the increased value of your property. Make sure to inquire about the LMI amount and factor it into your cost analysis.
3. Evaluate loan features.
Different loan products offer varying features such as drawdowns, redraw facilities, and offset accounts.
While the interest rate might be slightly higher for loans with these facilities, they can save you significant money in the long run, especially if you have surplus funds that can be used to offset your loan.
4. Consider the amortization rate.
With a principal and interest (P&I) loan, the distribution of your monthly payment between principal and interest changes over time.
In the early years, most of the payment goes toward interest, while in the latter years, it shifts toward the principal.
If you’ve already paid a significant portion of your loan, starting a new loan term may reset this balance. Take this into account when deciding to refinance.
5. See advice from a reliable mortgage broker before you refinance.
With countless loan products available, finding the right one can be overwhelming. A knowledgeable mortgage broker can help navigate this competitive market and match you with the lender and product that best suits your specific needs and financial goals.
Remember, the current market presents excellent opportunities for refinancing, as banks are actively seeking new customers.
If you’re interested in exploring your refinancing options, I invite you to contact a finance specialist to discuss further. They have access to a wide range of lenders and can guide you through the process. If you would like to use one of my preferred finance specialists please reach out and I can put you in touch with someone that can help you.
I hope these tips have been helpful. If you have any questions or need further assistance you can book a time in my calendar by clicking here.
See you next Tuesday!
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
