The Ins and Outs of Refinancing Your Home Loan
There has never been a better time to refinance your home loan. As the property market in Australia continues to show signs of softening, many lenders are discounting interest rates and offering more attractive deals in a bid to win new customers.
It is great news for you – particularly if your current loan is not performing as well as you would like.
How healthy is your current loan?
Compared to some of the new loans and lower rates on the market, you may currently have a home loan that is not in the best shape.
A home loan specialist can help you assess your existing loan. Think of it like a health check – the specialist will examine the loan for existing ailments (such as monthly fees, hidden costs including cheque books or ATM access, penalties for additional payments and so on), and also evaluate the long-term health of the loan.
They will also help you determine whether your existing loan has fancy features that you don’t use. These features bump up the cost of the loan – so if they are sitting idle, it is money down the drain.
Chances are, your existing loan is not too healthy. The good news is that there are ways you can get a better deal, simply by refinancing to a more cost-effective option.
Why bother refinancing?
The health of your existing loan should help you determine whether you refinance or not. Even a small rate cut can pay off quickly. Particularly when you find a lender willing to waive routine charges such as establishment fees or ongoing monthly fees. However, in exchange for low or no up front costs, you may have to accept a rate that’s somewhat higher than the prevailing rock bottom.
If you’re smart, refinancing becomes a process of weeding out the loans that look good on the outside but have hidden fees that turn them into a long-term burden. While promising lower interest rates, some discounted home loans come at the expense of higher fees or locked in products that push up costs.
What will it cost?
The cost of refinancing depends on your existing lender’s exit fees, and the establishment fees imposed by the new lender. You should check with your current lender what it would cost to pay out your loan early. Then it is a matter of weighing up how much you will save over the course of the loan.
If you find the right loan, you will save with a better value deal over the course of your loan. And the money you save can be invested elsewhere.
Disclaimer: – This is for general information only and is not financial product advice. It does not take into account your individual objectives or needs.
This information was provided by HSBC
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