| refinance, mortgage rates, mortgage | 11 Feb 2008 11:00 PM |
| Should I Refinance My Mortgage? by Kim Jennings | |
Refinancing your mortgage can be a very daunting experience. Am I doing the right thing? Will I recoup the costs involved in the refinance? Am I better off with a lower rate or lower fees? Will the financial institution I refinance with be accommodating and provide ongoing support? These are all questions you need to ask when thinking about a refinance.
The most common reason to refinance a home loan is mortgage rates, however you need to be cautious if this is the sole reason you are thinking about a refinance. Often loans with attractive low rates will incur high ongoing fees to compensate for the low rate offered and once the setup costs, ongoing fees and discharge fees incurred in the refinance are taken into account you may not be in a better situation than you were prior to the refinance. .
This is where a comparison rate can come in handy when considering products you may wish to refinance to. Comparison rates give a truer indication of the cost of the loan product, taking into account all the fees and charges. Also don’t forget to check any early repayment fees or break cost fees applicable on your existing loan when looking to refinance it as these can often be much higher than expected and also need to be taken into account in the costs involved in the refinance. Often it could take years on a lower interest rate just to recoup the early repayment penalties charged during a refinance. Basically all costs need to be taken into account when considering a refinance, not just the mortgage rates alone. .
Another reason to refinance might be product related. Some mortgage products offer a lot more than others. Loan products have come a long way recently, with many changes in the last few years such as free redraw, offset accounts, card access, on-line access etc. Often a refinance to a better product can help your financial situation considerably be it a home loan or investment loan. Before proceeding with a refinance for this purpose, it would often be best to consult your accountant or carefully do your own numbers, to make sure the refinance will be beneficial for your situation. .
There are many loan calculators available now which will help you compare loan products, be it comparing your existing mortgage to a new loan product you may be considering, or comparing an offset mortgage to a standard term loan to help with your loan decision. Ultimately all costs need to be considered when refinancing and weighed up against the benefits of the new loan product. .
Unless you are extremely dissatisfied with the service levels or professionalism of your existing lender, then before outlaying any costs in a refinance exercise, give you existing lender a call and see what they may be able to do for you. Because of the increased competition in the home and investment market, lenders’ margins have reduced considerably over the past 5 years. This said, it is worthwhile asking your existing lender if there is any scope for a rate reduction before incurring expenses. .
The most common reason to refinance a home loan is mortgage rates, however you need to be cautious if this is the sole reason you are thinking about a refinance. Often loans with attractive low rates will incur high ongoing fees to compensate for the low rate offered and once the setup costs, ongoing fees and discharge fees incurred in the refinance are taken into account you may not be in a better situation than you were prior to the refinance. .
This is where a comparison rate can come in handy when considering products you may wish to refinance to. Comparison rates give a truer indication of the cost of the loan product, taking into account all the fees and charges. Also don’t forget to check any early repayment fees or break cost fees applicable on your existing loan when looking to refinance it as these can often be much higher than expected and also need to be taken into account in the costs involved in the refinance. Often it could take years on a lower interest rate just to recoup the early repayment penalties charged during a refinance. Basically all costs need to be taken into account when considering a refinance, not just the mortgage rates alone. .
Another reason to refinance might be product related. Some mortgage products offer a lot more than others. Loan products have come a long way recently, with many changes in the last few years such as free redraw, offset accounts, card access, on-line access etc. Often a refinance to a better product can help your financial situation considerably be it a home loan or investment loan. Before proceeding with a refinance for this purpose, it would often be best to consult your accountant or carefully do your own numbers, to make sure the refinance will be beneficial for your situation. .
There are many loan calculators available now which will help you compare loan products, be it comparing your existing mortgage to a new loan product you may be considering, or comparing an offset mortgage to a standard term loan to help with your loan decision. Ultimately all costs need to be considered when refinancing and weighed up against the benefits of the new loan product. .
Unless you are extremely dissatisfied with the service levels or professionalism of your existing lender, then before outlaying any costs in a refinance exercise, give you existing lender a call and see what they may be able to do for you. Because of the increased competition in the home and investment market, lenders’ margins have reduced considerably over the past 5 years. This said, it is worthwhile asking your existing lender if there is any scope for a rate reduction before incurring expenses. .
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