With interest rates at near-record lows, many homeowners and investors are considering refinance their mortgages. But is it the right move for you?
The benefits to refinancing can be tangible, creating the potential for savings on mortgage repayments or the opportunity to use equity to invest.
Here’s some things to look out for if you’re considering refinancing.
1. MAKE SURE YOU SHOP AROUND
You may have a good relationship with your current lender, but the loan market is very competitive and loyalty will not save you money.
Don’t automatically go with your current lender for your refinance, make sure you shop around amongst lenders to find you the best rate that suits your objectives and financial goals.
2. “LOW RATE” DOES NOT ALWAYS EQUAL LOW COST
Sometimes the savings you will gain on mortgage repayments are outweighed by the costs of making the switch. Weigh up the additional fees like break fees, establishment fees for your new loan, legal fees, stamp duty etc. to see if these add more to your mortgage than you would save by refinancing.
3. MISSING THE BOAT WHILE WAITING FOR ANOTHER DROP IN INTEREST RATES
If interest rates are currently much lower than the rate you’re paying on your mortgage at present, then waiting to see if they will drop even further is a missed opportunity to save. Just remember, interest rates may go up as well while you’re waiting on the sidelines.
4. EVALUATE YOUR CREDIT RATING AND FINANCIAL POSITION TO GIVE YOU LENDING POWER
Everyone’s financial situation changes over time, often for the better. Evaluating your credit rating and financial position are key to securing the best rate and benefits for you from your new mortgage.
5. THE HONEYMOON IS OVER…AND THE RATE IS NOW HIGH!
If you’ve been impressed by an offer, it’s a great idea to have your mortgage broker check it out to see if its everything you believe it will be to avoid any unexpected surprises down the track.