Switch on the TV and you will notice that property markets and interest rates are usually front and centre of news bulletins and current affairs programs. Not surprising then that people spend a lot of time wondering about their mortgage. With interest rates at record lows and the banks competing harder than ever to attract and retain borrowers, more and more home owners are finding themselves in a position of strength when it comes to negotiating their home loan. But the decision to refinance shouldn’t come down to rate alone.
First, refinancing will cost you money. Your existing lender will charge a few hundred dollars on the way out, new lenders will charge a few hundred on the way in, and the Land Title’s Office (NSW) will charge similar to reflect the change on your certificate of title. You should budget to fork out at least $1,000 in the process, so although a saving of 0.20% sounds better in your pocket than your banks, you should calculate how long it would take to recoup your costs. Understanding this, some lenders are offering rebates or cashback incentives which will go some way to reimbursing these costs so it can make the switch cost neutral.
Second point is with regards to loan features. Do you currently need or use a redraw facility? What about making extra repayments? Are there any costs when you use these features? Often times the cheapest home loan may attract fees on a “user pays basis,” so you will need to weigh up these costs in your decision.
That being said there are many times when refinancing your home loan just makes good economic sense. A good rule of thumb is to review your financial situation every two to three years. Any more than that is counter-productive for the costs mentioned above. Any less however, and you could be missing out on significant savings. A good broker or personal lender should be staying in touch and offering to review your situation every few years to ensure you remain in the right home loan. If you feel that you are being forgotten then perhaps it’s time to seek some expert home loan advice and get another opinion.
Tower Mortgage Broking are a professional Sydney based mortgage broker. For expert home loan advice on refinancing your home loan, contact us today.