Is refinancing a viable proposition for you?
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Is it really worth my time, effort and above all, money to refinance my home loan?
The home loan repayment usually represents most people’s single largest monthly expense, so it makes good sense for borrowers to do their “home loan health check” and consider a refinance of their home loan as their mortgage progresses. Many lenders continuously improve their mortgage products and offer plenty of refinance options depending on the customer demand. A home loan ‘health check’ is generally a comprehensive analysis of your current home loan and comparison to a range of other mortgage products offered by the lender. The analysis takes into account interest rates, fees, loan structures, loan term as well as additional features including internet banking, credit card and cheque book facilities.
Depending on your situation, a refinance can be a very effective financial move that can save you a substantial amount of money in interest charges and shave years off your loan. Initially, you may have to outlay some refinance costs such as home loan set up fees, valuation cost, government charges and legal fees, however if the interest rate on your new home loan is substantially lower than the rate applicable to your existing account, you’ll break-even within only a few months after the settlement.
On the other hand, if your existing home loan offers an unbeatable interest rate and a competitive fee structure, you may find that a refinance may not be as cost effective during the fixed rate period. Mortgage consultants have to act in your best interest so if a refinance of your home loan seems like a very costly exercise, their recommendation to you should be to continue with your existing set-up for a few more years and suggest another review in a few years time.
In reality, the only initial cost you’re looking to outlay when shopping around and comparing your home loan to other similar products is your time. Gone are the times when the only available option was to walk down to the local bank apply for a home loan and pay it off without having the option to shop around for a better deal. The extensive mortgage industry consists of bank as well as non-bank lenders offering differently priced mortgages for home buyers, refinance packages for home owners and investor packs for people wanting to invest in real estate, shares or businesses.
So in conclusion, yes, you should find the time to compare your home loan to other products as often as possible. It is physically impossible for lenders to review your loan structure and home loan product every couple of years simply due to the large number of customers they service. If you decide to refinance your home loan after your research, the time you invest in your research could save you hundreds or even thousands of Dollars in interest and help you pay off your home loan faster. If you don’t decide to refinance your home loan, you can consider the time you spent on research to be an investment in your knowledge about the home loan products available in the market.
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